On 8 October 2012, the Chancellor, George Osborne, announced proposals for a new type of employment status, under which employees (“employee shareholders”) would forfeit some of their employment rights in exchange for shares in their employer. Any growth in value of the shares would be exempt from capital gains tax (CGT).

The stated aims of the Government’s employee shareholder proposals are to “improve the effectiveness and flexibility of the labour market” and to encourage businesses to recruit.

Unfortunately, few practitioners seem convinced that these objectives will be achieved – or that the proposals are even necessary. That dubiousness now appears to be shared by the House of Lords, as on 20 March peers backed the amendment to the Growth and Infrastructure Bill removing the clause on employee shareholders. 232 voted for its removal as against 178 to retain it. Shadow Treasury spokesperson Lord Adonis told the House: “I don’t think I’ve ever witnessed a government policy with less support”. (He also called the proposals a “totally mad idea” and “ill thought through, confused and muddled”.)

Despite this defeat (and despite 92% of respondents to the Government consultation viewing the plans in a negative or mixed way), the Government may well press ahead. This is, after all, a pet project of the Chancellor. Furthermore on the return to the House of Commons of the Growth and Infrastructure Bill, the House of Lords’ changes can be overturned and recent reports suggest that the House of Commons has done precisely that and reinstated the proposals.

Operating on the assumption that the proposals will become reality, as they are now timetabled to do on 1 September 2013, what do they entail?

The devil in the detail: overview of the proposals

The brief original Treasury and BIS press release states:

• The new employment contract will be available for all companies, but is principally intended for fast-growing SMEs that want a flexible workforce.

• Under these contracts, each employee will be “given” shares worth between £2,000 and £50,000 that will be exempt from CGT (employee shareholder shares).

• In exchange, an employee shareholder will give up their UK rights relating to:
– protection against unfair dismissal;
– redundancy; and
– the ability to request flexible working and time off for training.

• In addition, employee shareholders will need to give 16 weeks’ notice of a firm date of return from maternity leave rather than just 8.

• Employee shareholder status cannot be imposed on existing employees.

• New employment may be offered exclusively on an employee shareholder basis if the employer wishes.

• Employers can offer employee shareholders more generous employment terms if they wish.

• Employee shareholder shares will attract full CGT relief and continue to be eligible for existing statutory tax-favoured employee share ownership schemes, including EMI options.

At the report stage and third reading of the Growth and Infrastructure Bill further amendments were proposed which include:

• Restricting the right of employee shareholders returning from parental leave to make a formal request for flexible working to the period of 14 days beginning with their return.

• A power to make secondary legislation to regulate the terms on which companies can buy back employee shareholder shares when employee shareholders change status or leave.

• Protection for existing employees against detriment or dismissal if they refuse to become employee shareholders.

Tax and National Insurance implications

The 2013 Budget included further details about the tax treatment of employee shareholder shares. At last the income tax position has been clarified, with confirmation that legislation will be introduced to prevent an income tax charge on a buyback of CGT-exempt employee shareholder shares.

The relevant income tax and National Insurance contributions (NICs) legislation will be amended to deem, for tax and NICs purposes, that an employee shareholder pays £2,000 for their employee shareholder shares. These changes will eliminate income tax liabilities on acquisition for employee shareholders receiving the minimum value of employee shareholder shares (assuming that the employee does not enter into a section 431 election to tax the unrestricted value of the shares when acquired, if they are restricted securities).

However, by extension it seems clear that there will be an income tax liability for employee shareholders who acquire shares worth more than £2,000. Any tax liability on acquisition will be payable through PAYE, with associated NICs liabilities, if the shares are readily convertible assets.

Draft clauses related to the income tax and CGT treatment of employee shareholder shares will be included in the Finance Bill 2013 (but were not yet available at the time of writing this article).

The employee shareholder tax provisions are expected to come into effect on 1 September 2013, at the same time as the Growth and Infrastructure Bill which introduces the employee shareholder employment status.

Proposals under the microscope

Questions which immediately spring to mind in relation to the proposals include the following:

1. Why would any individual swap potentially valuable employment rights for shares when there may be no obvious market for those shares and hence their saleability (and hence the price that might be capable of being achieved for them) might be limited?

2. Valuation of company shares is already a complex issue, often requiring expensive professional expertise and negotiation with HMRC. How attractive is the employee shareholder regime in reality, if employers are going to need regular share valuations, not only for initial acquisitions, but for buying back shares from leavers and keeping employee shareholders informed and engaged?

3. Generally speaking, any sensible company puts in place good and bad leaver provisions in their articles of association which dictate the value a departing shareholder receives for their shares if they leave employment – are such provisions going to be acceptable under this regime? If not, then is the arrangement not unpalatable for employers? If they are to be permissible, is the arrangement not also unpalatable for employee shareholders? Obviously the revisions to the Growth and Infrastructure Bill, as referred to above, provide that secondary legislation may be enacted to address this area but there are no firm proposals as yet about this.

4. Given the company law limitations on the ability of private companies to buy back their own shares, won’t the employer need an Employee Benefit Trust for this purpose, to provide a market for the shares? Is this not an additional layer of complication and cost that will make the arrangement even less attractive for many SMEs?

5. How many potential employee shareholders are going to want to pay to take advice on the drafting of the potentially complex documentation governing their holding of shares? If they don’t take advice, how many disputes are going to arise when they exit the company and are disappointed about how little they get back?

6. How much satellite litigation will be created by such an arrangement being put in place? Disputes over status, over discrimination and automatic unfair dismissal claims (both being classes of protection which employee shareholders will retain and hence issues are likely to be “shoe-horned”, however spuriously, into those categories), over the value of the shares and ability of the employer to claw them back are all time-consuming and potentially costly. Many employers might prefer the (relative) certainty of the established case-law pertaining to “normal” employees rather than the yet-to-be developed principles surrounding employee shareholders.

7. Given the proposed income tax treatment, only individuals being “gifted” the minimum value of shares will avoid a charge to income tax. As things stand there are no plans to mitigate the income tax position for those receiving more than £2000 worth of shares. So depending on the value of the shares (and hence the quantum of the tax charge) are such shares not a “gift” that you have to pay for?

8. Is the decision to restrict employee shareholders’ access to maternity rights and flexible working not in direct conflict with the Government’s advertised commitment to family-friendly policies?

Summary

The CIPD has observed that unfair dismissal protection “doesn’t figure in the list of top ten regulations discouraging employers from recruiting staff”. In which case, aren’t these proposals unnecessary? They have significant, complex (and potentially costly) implications for employers and employee shareholders alike, including an array of legal, tax and accountancy issues. A Government truly committed to a reduction in red tape would not have tabled these proposals – or at least would have attributed proper weight to the negative feedback arising out of the (all too short) consultation.

In the response to this consultation we learn how the Government proposes to implement changes in the Enterprise and Regulatory Reform Bill (ERRB) regarding the inadmissibility of settlement offers in unfair dismissal claims and a new cap (of a year’s salary) on the compensatory award in unfair dismissal cases.

Settlement agreements
Clause 12 of ERRB will make pre-termination negotiations inadmissible in respect of unfair dismissal claims, without any need for an existing dispute, except where there has been “improper behaviour”. This will therefore extend the “without prejudice” principle.

ERRB will also rename compromise agreements as “settlement agreements” throughout existing employment legislation. It is believed that a change to the way in which settlements can be offered will be more effective than the broader concepts of protected conversations and no-fault dismissals, which have now been abandoned.

The Government will proceed with a Statutory Code of Practice and accompanying guidance on how to negotiate settlements and make best use of the new legislative provisions. The Statutory Code of Practice will include an explanation of “improper behaviour”, which will largely reflect the common law test of “unambiguous impropriety”. To encourage the use of settlement agreements, a template agreement and suggested letters will be made available as part of guidance alongside the Statutory Code. The government has rejected the idea of setting a guideline tariff for settlement agreements, and will instead develop guidance outlining the issues that should be considered when deciding and negotiating the level of financial settlement. Acas will shortly be publishing a draft Statutory Code for public consultation. Clause 12 of ERRB is expected to come into force in summer 2013 and the new Code and guidance will come into force at the same time.

Unfair dismissal compensatory award
The unfair dismissal compensatory award will be capped at the lower of one year’s pay and the existing limit (£72,300 – rising to £74,200 in February 2013). The Government believes that a salary-based cap will help manage employees’ expectations, encourage early resolution of disputes and create more certainty over the likely total costs for employers of an unfair dismissal claim. It anticipates that the changes to the compensatory award will also come into effect in summer 2013.

In response to the ‘call for evidence’ that concluded in 2012, the Government has issued a consultation on proposed changes to the Transfer of Undertakings (Protection of Employment) Regulations 2006.

One of the most significant proposed changes is to repeal the legislation surrounding ‘service provision changes’ under which contracting out, contracting in and retendering exercises were expressly brought within the scope of TUPE.

Other proposals for reform include changing the wording of the restrictions on varying contracts or dismissing in relation to a TUPE transfer, so that these restrictions more closely reflect the minimum requirements of the EU Acquired Rights Directive.

The proposed repeal of the ‘service provision change’ (SPC) provisions comes in response to business concerns that the Regulations ‘gold plate’ the Directive. The Government notes that it is not clear that the intended benefits of the SPC provisions, such as increased clarity over when the Regulations apply, have been realised. It also accepted that the SPC provisions may inadvertently result in anti-competitive behaviours, in that transferors may use an SPC as a means of keeping only the employees they wish to retain and transferring those they wish to lose. The Government states that there will be a lead-in period before any repeal to accommodate SPCs currently in preparation.

With regard to the existing restrictions on varying contracts in connection with a TUPE transfer, the Government has indicated its willingness to legislate to permit post-transfer harmonisation of terms and conditions, but notes that any such change would probably be incompatible with the Directive. Instead, the Government is suggesting that Reg 4 could be amended so that changes by reason of the transfer itself would still be prohibited, but (a) the parties would be able to agree any change that they could have agreed had there not been a transfer, and (b) the parties could still agree a variation for an ‘economic, technical or organisational’ reason (ETO reason).

Other changes include a change to the wording of the restriction on TUPE-related dismissals, similar to that proposed in relation to Reg 4, so that dismissals that are only ‘connected’ to the transfer, and not by reason of the transfer itself, may not be automatically unfair.

The Government is also proposing to amend the definition of ETO reason ‘entailing changes in the workforce’ to include changes in workforce location; and to narrow the scope of the right under Reg 4(9) to resign in response to a ‘material detriment’ consequent on the transfer and be treated as dismissed.

The Government has announced plans to tackle long-term workplace sickness absence with a new independent assessment and advisory service to ensure employers receive bespoke, independent advice where a sickness absence lasts more than four weeks.

In its delayed response to Dame Carol Black’s independent review of sickness absence the Government has stated that it will, amongst other things:

• establish a health and work assessment and advisory service to provide a state-funded assessment by occupational health professionals for employees who have been on sick leave for four weeks to ‘signpost’ appropriate interventions, provide employers and employees with advice on overcoming barriers to a return to work and provide case management for the minority of employees with complex needs who require ongoing support to enable their return to work;
• publish revised ‘fit note’ guidance for GPs, employers and individuals during the first quarter of 2013 to emphasise the importance of assessing an individual’s health in relation to work in general and not just for one specific role;
• consider in the 2013 budget whether expenditure by employers targeted at keeping sick employees in work (or speeding their return to work) such as medical treatments or vocational rehabilitation should attract tax relief;
• abolish the Percentage Threshold Scheme which compensates mainly smaller employers for very high rates of sickness absence in their organisations thereby arguably reducing any incentive to manage absence; and
• abolish statutory sick pay record-keeping obligations to enable employers to keep records in the manner which best suits their organisation.

We are delighted to share with you Pharos Legal’s latest Beacon – updating you on a hugely significant change to PAYE reporting and what you need to be doing now in readiness for those changes in April and also taking a look at what 2013 is to bring in terms of changes to the UK’s legal framework – take a look here…Pharos Legal Beacon issue 17

Flexible working

The government is to proceed with the extension of the right to request flexible working. The right will from 2014 become available to all employees with 26 weeks’ continuous service.

The current statutory procedure will be replaced with a duty on employers to deal with requests “reasonably”, and a statutory code of practice will be issued to give guidance as to how this will work in practice. Guidance will also be made available on how employers should prioritise conflicting requests received from different employees.

Flexible parental leave

The government is to introduce a new system of statutory parental rights in 2015. This is designed to allow parents to choose how best to balance their work and childcare responsibilities.

Parents will be able to share the statutory leave and pay that is currently only available to mothers. Flexible parental leave can either be taken by each parent consecutively, or by both parents concurrently, as long as the combined amount of leave does not exceed the amount which is jointly available to the couple.

Similar principles will apply to statutory flexible parental pay, which will be available as an alternative to statutory maternity pay. Additional paternity leave and additional paternity pay will be abolished, and there will be no extension to the current statutory paternity rights. The entitlement to unpaid parental leave will be extended from 13 to 18 weeks for each child from March 2013, and from 2015 each parent will be able to exercise this right for children up to the age of 18.

We are delighted to share with you Pharos Legal’s latest Beacon – updating you on what we’re up to, recent developments in employment law cases and proposed changes to the legal framework – take a look here…Pharos Legal Beacon issue 16

Consultation on employee owner status

In October, the Chancellor, George Osborne, announced proposals for a new type of employee ownership arrangement, under which employees would give up some of their employment rights in exchange for shares in their employer. The government has now issued a consultation paper on these proposals, in which it is clear that it is actually proposing a new employment status, “employee owner”.

It is seeking views on:

- How the government will implement this new status in practical terms.
- The implications for employers, individuals, and the labour market in general.

In particular, it wants to ensure there are no unintended consequences.

The deadline for responses is 8 November 2012.

The Growth and Infrastructure Bill would amend the Employment Rights Act 1996 to introduce the new status.

The consultation focuses mainly on the employment law aspects of the proposals, and does not address the tax issues in any detail. HM Treasury will apparently consult separately on the tax aspects of the proposals.

BIS proposes changes to the Companies Act 2006 to promote transparency in gender balance

On 18 October 2012, BIS published the draft Companies Act 2006 (Strategic Report and Directors’ Report) Regulations 2013 for consultation.

The draft Regulations revoke section 417 of the Companies Act 2006, which currently requires a company’s directors’ report to include a business review. In place of the business review, companies must produce a stand-alone strategic report for each financial year, separate from the directors’ report. The requirements of the new strategic report broadly match those for a business review.

However, in relation to quoted companies only, new Chapter 4A requires three separate disclosures of the number of persons in the company of each sex who are:

- Directors.
- Managers (excluding those who are also directors).
- Employees of the company.

This new requirement implements one of the recommendations made in the Davies report “Women on Boards” and which a number of FTSE 350 companies have voluntarily complied with in their 2012 annual reports.

BIS invites comments on the draft Regulations by 15 November 2012. They are scheduled to come into force in October 2013 and will apply to companies preparing annual reports for financial years ending after the implementation date.

The National Minimum Wage (Amendment) Regulations 2012, made on 15 September 2012, will change the rates of national minimum wage in accordance with recommendations from the Low Pay Commission.

The following hourly rates of national minimum wage will apply from 1 October 2012:

• The standard adult rate (workers aged 21 and over) will be £6.19.
• The development rate (workers aged between 18 and 20) will be £4.98 (unchanged from last year).
• The young workers rate (workers aged under 18 but above the compulsory school age who are not apprentices) will be £3.68 (unchanged from last year).
• The rate for apprentices will be £2.65.

Business Secretary Vince Cable has made a number of announcements about the government’s ongoing programme of employment law reform.

Two new consultation papers have been published. These cover:

• proposed new employment tribunal rules following Mr Justice Underhill’s review;
• a reduction to the cap on unfair dismissal awards; and
• measures to encourage the use of compromise agreements (to be renamed “settlement agreements”) to facilitate termination of employment.

The government has also published the results of two of its recent calls for evidence. The outcome is that  the idea of compensated no-fault dismissal has now formally been abandoned, and consideration will be given to the policies to be put forward for consultation on TUPE 2006.

The Ministry of Justice has published the results of its consultation on the introduction of fees in employment tribunals.

To date claimants in the employment tribunal have not had to pay anything for issuing a claim (or for having it heard) but with effect from summer 2013 it is intended that this will change. The intention is that the introduction of fees will lower the cost of the employment tribunal system to the taxpayer.

The key points are as follows:-
• level 1 claims (very straightforward ones such as unlawful deductions and claims for payment in lieu of notice and redundancy pay) – will attract a £160 issue fee and £230 hearing fee;
• level 2 claims (most other claims including unfair dismissal and discrimination complaints) – will attract a £250 issue fee and £950 hearing fee; and
• at the Employment Appeal Tribunal a £400 fee for lodging the appeal will apply, in addition to a £1200 hearing fee.

Several other fees are proposed, for example £60 for an application to dismiss following settlement and £600 for judicial mediation.

People on low incomes may not be required to pay the full fees – apparently the same remission system which already exists for court users who pay fees to use the civil courts’ services will be utilised. Following this extension of the exemption system, the Government will review its use across both courts and tribunals and publish a consultation later this year.

Fees to use the employment tribunal will be payable in advance, and most types of fee will only apply to the person bringing the claim. However the tribunal will have the power to order the unsuccessful party to reimburse the fee to the successful party. In practice, cases are often settled rather than there being a clear ‘winner’ or ‘loser’ and the issue of reimbursement would form part of the settlement terms agreed between the parties.

A fundamental review of employment tribunal rules and procedures has been carried out by Mr Justice Underhill and we have just learned some of the detail of his recommendations.

Here are a few of the key points:-

• cases are to go through an initial paper sift, to consider directions and consider strike-out of aspects lacking a reasonable prospect of success
• Case Management Discussions (CMDs) and Pre-Hearing Reviews (PHRs) are to be combined and relabelled ‘Preliminary Hearings’
• an express power is to be given to judges to limit oral evidence and submissions, and impose a guillotine if directions are breached
• rules on default judgments are to be simplified and provisions for restricted reporting and anonymity orders expanded
• the £20,000 cap on the tribunal’s ability to assess costs is to be removed, avoiding the need to refer to the County Court for assessment.

Some of these sound innovative and new but aren’t.

The initial paper sift process is already followed as a matter of practice. At best, its explicit inclusion in the Rules may encourage its effective use.

Judges can already limit oral evidence and so prevent disproportionately lengthy questioning and submissions but rarely do so in practice; again the introduction of an express rule can therefore serve only as encouragement in the use of these powers.

Combining PHRs and CMDs is a cosmetic change really; their effective use is really dependent on improved training for Employment Judges.

The other main proposals won’t affect the majority of claims; restricted reporting and anonymity orders are not relevant to most standard employment claims. Employment Judges are in our experience slow to award costs (an issue that is unfortunately left untouched by the proposals) so whilst removing the £20,000 cap makes sense, it will not affect most cases.

In summary we’d see the proposals as rather disappointing and not far-reaching enough.

The Enterprise and Regulatory Reform Bill was laid before Parliament on 23 May.

Quite separate from the proposals made in the Beecroft report, this new Bill provides for:

• a mandatory period of Acas conciliation before instituting tribunal proceedings (with a significant amount of detail to be set out in regulations which are not yet available);
• the extension of limitation periods to allow for pre-claim Acas conciliation;
• the introduction of ‘legal officers’ to make decisions in certain cases if all parties agree in writing;
• EAT cases to be heard by a judge alone, unless ordered otherwise;
• the Secretary of State to be able to limit the unfair dismissal compensatory award to a maximum sum sitting between 1 x and 3 x national median earnings. BIS is apparently operating on a median average earnings figure of £26,000, meaning that if the power is exercised the compensatory award will be capped at somewhere between £26,000 and £78,000;
• alternatively, the power for the Secretary of State to limit unfair dismissal compensatory award to one year’s earnings;
• the power for a tribunal to impose a penalty on employers of 50% of any financial award, subject to a minimum of £100 and maximum of £5,000, where there are “aggravating features” (not defined), with a 50% discount for payment within 21 days;
• the definition of ‘qualifying disclosure’ in whistleblowing legislation to be restricted to disclosures made “in the public interest” (not defined); and
• ‘compromise agreements’ to be renamed ‘settlement agreements’.

There’s a recurring theme here, as you can see – much of the devil will be in the detail and we don’t have the detail yet.

Furthermore in our experience the service provided by Acas is already seriously over-burdened and it is hard to see how it would cope with the increased workload contemplated by the Bill. It’s enough to make your head spin. The Government certainly seems intent upon making things “interesting” for the nation’s employers. We shall keep you posted!

At Pharos Legal we have been watching the impact of the unveiling of the Beecroft report with interest.

The leaked report recommends, among other things, the introduction of ‘compensated no-fault dismissal’ for all businesses and exemptions from unfair dismissal law for small businesses with fewer than 10 employees.

The report claims that ‘making it easier to remove underperforming employees will in the short run not increase unemployment as they will be replaced by more competent employees. In the long run it will increase employment by making our businesses more competitive and hence more likely to grow’.

Business Secretary Vince Cable has subsequently taken care to end speculation that the Government will introduce no-fault dismissal for all businesses, stating that, in his conversations with businesses, no-fault dismissal ‘has very rarely been raised with me as a barrier to growth’ and that businesses ‘are much more concerned about access to finance or weak demand’.

Mr Cable will be assessing the case for no-fault dismissals when the Government’s call for evidence on the introduction of compensated no-fault dismissal for micro business closes on 8 June 2012.

Whilst we are in no doubt that something needs to be done in order to boost the economy (answers on a postcard!), we are of the view that further legal reforms are unlikely to be the answer. The headlines made attractive reading (“We need to make these changes to boost the economy!”) but has the economic impact of the recent and proposed changes to employment law been quantified? No. The purported benefits are simply not supported by any evidence.

The Department for Business, Innovation and Skills (BIS) has confirmed that the proposed increase in the qualifying period for unfair dismissal claims to two years is only to apply to those starting a new job on or after 6 April 2012. Employees whose employment started before 6 April will remain subject to the one-year qualifying period. The regulations to extend the qualifying period are due to be published shortly and will be subject to Parliamentary debate.

BIS also stated that it will not implement the revised EU Directive on Parental Leave in March 2012. Due to the ongoing work on the Modern Workplaces consultation, the Government will instead take advantage of the additional year’s grace allowed by Art. 2(3) of the Directive to implement the changes in March 2013. Consequently, the number of weeks of unpaid parental leave will increase to 18 per parent per child ahead of the other changes proposed in the consultation for 2015, which include a new flexible system of shared parental leave and an extension of the right to request flexible working.

Further details on the intended dates for a number of reforms announced last year as part of the Employment Law Review were given by the Employment Relations Minister Edward Davey in a written answer to Parliament on 17 January.

Subject to parliamentary approval, changes to be effected via secondary legislation – witness statements being taken as read, the removal of witness expenses, judges sitting alone in unfair dismissal cases and changes to limits for cost awards and deposit orders – will come into force on 6 April 2012.

Measures requiring primary legislation, including financial penalties for employers, early conciliation, judges sitting alone in the EAT as a default arrangement and an amended formula for uprating tribunal awards and redundancy payments, will be implemented when parliamentary time allows.

The revised procedural code for employment tribunals anticipated as a result of Mr Justice Underhill’s review of the Employment Tribunal Rules of Procedure is expected to come into force in 2013, following public consultation and subject to parliamentary approval.

Months of speculation have been brought to an end today as Business Secretary Vince Cable has announced the government’s proposals for a radical overhaul of employment law. The government has also today published its Response to the Consultation on Resolving Workplace Disputes.

The main proposals are:-
• an increase in the unfair dismissal qualifying period to two years;
• compulsory lodging of all claims through ACAS, for an attempt at mediation, before they can be lodged with the tribunal;
• consultation on the introduction of protected conversations, with the caveat that they will not be capable of protecting discriminatory acts; and
• a call for evidence, with a view to consultation, on the benefits of reducing the minimum period for redundancy consultation to 60, 45 or 30 days.

Surprisingly there are more proposals for change afoot as well, which are:-
• options for a ‘rapid resolution scheme’, to enable simple claims to be settled within three months;
• an amendment to s147 of the Equality Act 2010, to clarify that compromise agreements can be used to settle discrimination claims;
• complaints about breaches of the employment contract to be taken out of the ambit of whistleblowing law;
• financial penalties, payable to the Exchequer, to be levied on employers who breach employment rights (subject to a discretion exercisable by Employment Judges);
• a fundamental review of employment tribunal rules of procedure, to be led by Underhill J (who steps down as President of the EAT at the end of next month), to include changes to costs and desposit orders;
• Employment Judges to sit alone in unfair dismissal cases rather than with 2 lay members as is currently the case;
• CRB checks to be made portable, to remove the need for a fresh application when moving jobs; and
• maternity and paternity leave to be modernised, with an emphasis on greater involvement for fathers.

What’s more is the government has said it is still looking at the option of compensated no-fault dismissals for micro-businesses (but it is not publishing any proposals at this time).

On 10 November 2011 David Cameron confirmed that the government is to consult on the introduction of “protected conversations”. This is apparently so that (as he put it) “a boss and an employee feel able to sit down together and have a frank conversation at either’s request”.

Nick Clegg previously suggested that such a conversation could for example concern performance or retirement.

From an employer’s perspective this sounds appealing. As a firm which also advises individuals, however, our concern is that such conversations would be used as a stick to beat an employee with and in effect bully them into resigning. Certainly it doesn’t seem like a tool which will promote better employment practices and it’s just likely to lead to disputes about whether the conversation was or was not “protected” – a similar problem to that of “without prejudice” protection and whether that is applicable.

The Prime Minister also confirmed that the qualifying period for unfair dismissal will increase from one to two years from April 2012, and that fees will be introduced for individuals bringing employment tribunal claims. In the meantime, Business secretary Vince Cable has stated that a decision on the unfair dismissal proposals made in the recently leaked “Beecroft report” will be announced in the Chancellor’s autumn statement due to be made on 29 November 2011.

If you missed the Beecroft Report, the nub of its proposals is that our current unfair dismissal laws are (allegedly) stifling growth and that we should dispense with them and enable employers to dismiss with impunity unproductive workers in exchange for paying basic redundancy pay and notice (so-called “Compensated No Fault Dismissals”).