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Enterprise and Regulatory Reform Act 2013

Summary and Background

79.Employees who have a qualifying period of service of two years, or one year if service commenced before 6 April 2012, are eligible to file a claim if they believe they have been unfairly dismissed (section 94 of the Employment Rights Act 1996 (“ERA 1996”)). Section 108(3) of the ERA 1996 lists types of claims for dismissal in which the requirement for an employee to have a qualifying period of employment does not apply; dismissals on the grounds of political opinion or affiliation are not included in that list.

80.The limit on the compensatory award for unfair dismissal has been subject to various changes since the introduction of the right to claim unfair dismissal in 1971. Most recently, the limit was subject to a ‘one-off’ increase from £12,000 to £50,000 in 1999. The limit has subsequently been linked to a formula that has meant that it has increased slightly in excess of Retail Price Index inflation and is currently £74,200.

81.Where an employer and employee are discussing ending the employment relationship under the terms of a settlement agreement, they can currently have these discussions on a confidential basis if the ‘without prejudice’ principle applies. The principle of without prejudice developed through case law and prevents written or oral statements which are made in a genuine attempt to settle an existing dispute from being submitted as evidence in court. If the without prejudice principle does apply, it means that a settlement offer and anything said during settlement negotiations cannot be submitted as evidence in a subsequent employment tribunal claim.

82.The without prejudice principle will not apply where there is no formal dispute between the employer and employee. So it will often not apply to a settlement offer, or negotiations about the offer, taking place before the employment relationship has ended. In such cases, the offer or negotiations can be submitted as evidence in a subsequent tribunal claim. The purpose of section 14 is to provide a means for employers and employees to discuss settlement before any dispute has actually arisen, with certainty that the offer and any discussions about it cannot be used as evidence against them in a subsequent unfair dismissal claim.

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