Small Business, Enterprise and Employment Act becomes law
The much anticipated Small Business, Enterprise and Employment Act 2015 finally gained Royal Assent on 26 March 2015.
Key employment law changes ahead
The much anticipated Small Business, Enterprise and Employment Act 2015 (SBBE) finally gained Royal Assent on 26 March 2015, squeezing through on the last day of this year’s parliamentary session.
The Act is a real ‘mixed-bag’ of provisions encompassing a broad range of issues from pubs to childcare. However, a large part of the new statute is made up of key changes to employment law.
Some of the new provisions set out in the Act take effect straight away. However, in most cases, the Act simply contains a ‘regulation-making’ power, which sets out the measures the Government intends to take and enables further legislation to be introduced to bring about those changes in future. The employment law highlights of the Act are summarised below:
Which provisions are in force now?
The only major employment provision of the new Act that takes immediate effect gives the Government power to make changes to employment tribunal procedure. The Government has recently consulted on measures to reduce delays in the Employment Tribunal system caused by frequent and short notice postponements. This Act confirms that future provision might be made to limit the number of postponements available to the parties to the claim and, potentially, to attach costs consequences to postponement requests made at short notice. However, any changes are likely to be some way off given that the consultation exercise has only recently closed.
Which provisions come into force in future?
Zero-hours contracts: Exclusivity Ban
This ‘flagship’ provision of the Act holds that ‘exclusivity’ clauses in ‘zero-hours’ contracts are invalid and unenforceable. In other words, where there is no guarantee of paid work an individual cannot be prevented from undertaking work for another employer. However, despite the fanfare that has greeted the passing of the Act the ban is not in force yet: further regulations are awaited. The Government has already prepared yet another set of draft regulations aimed at tackling avoidance of the exclusivity ban which will follow in due course if they meet with parliamentary approval.
ET Awards: Penalties for failure to pay
The Government has set out to tackle very poor levels of compliance in the payment of Employment Tribunal awards by introducing tough financial penalties for defaulting employers. Any employer who has failed to satisfy an award will receive a ‘warning notice’ followed by a ‘penalty notice’ if payment has still not been made after 28 days. The amount of the penalty has been set at 50% of the unpaid amount owed to the Claimant (subject to a minimum of £100 and a maximum of £5,000) although the penalty will be reduced if paid promptly. The penalty is payable directly to the Secretary of State rather than to the Claimant (who remains entitled to the outstanding payment owed to them). Importantly this penalty for failure to pay will not apply if there is any outstanding appeal. Again further regulations are required to bring the new penalty regime formally into effect.
Changes to National Minimum Wage Penalties
The maximum penalty that can be imposed on an employer that underpays workers in breach of the national minimum wage will be increased. The penalty will now be calculated on a per-worker basis. The maximum penalty currently stands at a maximum of £20,000 per notice of underpayment regardless of how many employees are covered by that notice. The new maximum is £20,000 per worker. Although the new Act is now law, these new higher penalties will only ‘kick in’ when further secondary legislation brings this provision formally into effect.
Gender pay gap reporting
Employers will be required to annually report pay differences, as a result of a late amendment to the Act as it passed through Parliament. The Act states that the Government must introduce regulations compelling employers with more than 250 employees to publish pay data for the purpose of showing whether there are differences in pay between male and female employees. This follows previous unsuccessful attempts to encourage the voluntary publication of pay information. A consultation exercise must be carried out and regulations published within the next 12 months. The exact form, content and frequency of the mandatory reports have yet to be determined.
Whistleblowing ‘best practice’ measures
The Act enables the Government to introduce regulations to ensure the operation of more systematic processes for the consideration and reporting of whistleblowing complaints. Special protection will be introduced to prevent discrimination against applicants for NHS roles on the grounds they have made protected disclosures. It is not clear exactly what these regulations will look like and when we can expect them to be published.
Public Sector Exit Payments
The Act contains a power for the Government to make regulations requiring high earning individuals leaving public sector roles to repay exit payments where they return to the public sector as an employee, contractor or public sector office holder. The proportion of the redundancy payment to be paid back is likely to depend on the period of time between exit and re-employment. Again, no timescale has been given for these changes to be introduced and we are not yet sure of all the details.
What does this mean for me?
The ban on ‘exclusivity’ in zero-hours contracts has attracted the most media attention of the Act’s employment law provisions. If you currently insist on exclusivity from any employee with no minimum contractual hours of work you will need to review these arrangements urgently. Although this part of the Act is not yet in force, all the main political parties share a commitment to tackling zero-hours contracts so it is soon likely to come into effect formally. It is important to note that non-contractual ‘zero-hours arrangements’ are captured too, although it would be unusual for exclusivity to be an issue in these circumstances.
If your business finds itself on the losing side of an Employment Tribunal claim it has never been more important to pay promptly and fully (unless you are pursuing an appeal). The new penalty rules also apply to settlement monies and orders made by a Tribunal in respect of legal costs.
While mandatory gender pay gap reporting is still some way off, it may be worth giving thought now to how it may apply to you. You may wish to consider collating or reviewing gender pay information now to consider whether there are significant discrepancies in particular grades or areas and whether these can be addressed. For further information on the potential impact of mandatory gender pay gap reporting please see our alert of 11 March 2015.
Public sector employers will wait with interest for further information on the proposals on exit payments. Depending on the detail, it may be necessary to take a fresh look at how the public sector deals with change. We will update you with any developments.
This new Act is relatively unusual in that it covers such broad terrain. However, a unifying theme of relieving the regulatory burden on business, in particular smaller companies, pulls together many apparently disparate provisions.
Crucially though, the Act sends out a very clear message to unscrupulous employers that they must take their responsibilities seriously. Indeed, the Government’s press release on the new legislation declares that “there is nowhere to hide for firms who do not play by the rules, whether by abusing zero hours contracts or not paying the minimum wage”.
Of course, the ultimate fate of those changes still in the pipeline will depend on the outcome of the forthcoming election. A change in government may mean a change in priorities.
If you would like to discuss in more detail the implications of any of these changes for your organisation please speak to your usual Weightmans contact or get in touch with Phil Allen in our Manchester Office (firstname.lastname@example.org).