Employment Act 2002 outlined

The Employment Act, which reached the UK statute book in July 2002, introduces new provisions concerning 'family-friendly' working, the resolution of individual disputes at the workplace, equal treatment for fixed-term employees and other matters. This feature summarises its main requirements and the timetable for their implementation, and looks at employer and trade union views of the new legislation.

Having completed its passage through Parliament, the Employment Bill (UK0112104N) received royal assent on 8 July 2002. The Employment Act 2002 is a major piece of legislation. Its key themes are the enhancement of statutory rights designed to help parents balance work and family commitments, and the reform of employment tribunal procedures and workplace dispute resolution mechanisms in response to the rising number and cost of employment tribunal claims in recent years (UK0108142N). It also includes provisions on a range of other issues, including equal treatment for fixed-term employees and time off for trade union learning representatives. The Act, and several sets of associated regulations, will be implemented in a number of phases over the coming year.

This feature summarises the Employment Act’s main requirements and the timetable for their implementation, and looks at employer and trade union views of the new legislation.

Key provisions of the Act

'Family-friendly' working

A range of improvements to employees’ existing parental leave rights (UK9912144F) will take effect from April 2003. These include:

  • increases in the standard rate of statutory maternity pay (SMP) and maternity allowance to the lesser of GBP 100 per week or 90% of the employee’s average weekly earnings;
  • an increase in the period of maternity leave to six months’ paid maternity leave followed by up to six months’ unpaid leave;
  • the introduction of a new right to two weeks’ paternity leave paid at the same standard rate as SMP. This is in addition to the existing right to 13 weeks’ parental leave;
  • similar entitlements for adoptive parents (who have no right to paid leave at present); and
  • amended rules governing employers’ handling of parental leave and pay issues.

Detailed provision on the operation of these rights will be set out in regulations. Consultation on draft regulations closed on 19 July 2002.

The Act also gives parents of children under six years of age (or disabled children up to the age of 18) the right to request flexible working patterns for childcare purposes, and places a duty on employers to give proper consideration to the request (UK0112105N). The aim is to facilitate dialogue between working parents and their employers about working patterns that meet parents’ childcare responsibilities as well as employers’ business needs. Such a request may involve:

  • changes to the hours and times the employee works;
  • working at home; and
  • changes to other aspects of the employee’s terms and conditions as specified in regulations by the secretary of state.

Employers will be able to reject such requests for specific business reasons. These are:

  • the burden of additional costs;
  • detrimental effect on ability to meet customer demand;
  • inability to reorganise work among existing staff;
  • inability to recruit additional staff;
  • detrimental impact on quality;
  • detrimental impact on performance;
  • insufficiency of work during the periods the employee proposes to work;
  • planned structural changes; and
  • such other grounds as the secretary of state may specify by regulations.

The Act sets out a procedure and timetable which employers must follow in responding to such an application, which will be fleshed out by regulations. The employer must arrange a meeting, within 28 days of receiving an application, to discuss the employee’s request, at which the employee may be accompanied by a representative. The employee must be informed of the employer’s decision within 14 days, and the employee has a further 14 days to appeal.

There is scope for the employee to complain to an employment tribunal on the grounds that the employer has either failed to comply with the statutory procedure or based the decision on incorrect facts. The tribunal will not be able to impose a flexible work arrangement, but may order the reconsideration of the application or award compensation.

Consultation on draft regulations containing detailed provisions on the operation of the new right closed on 10 October 2002. The regulations are due to take effect from April 2003.

Employment tribunal reform

The Act introduces a number of changes to employment tribunal procedure. Among other things, it enables the secretary to state to make regulations authorising tribunals to:

  • award costs against a party’s representative for conducting the proceedings unreasonably (though ministers have made it clear that this will not apply in the case of representatives of 'not-for-profit' organisations, eg trade union officers); and
  • order one party to make payments to the other in respect of the time spent in preparing for a case.

The Act also provides the basis for amending employment tribunal rules to introduce a fixed period for conciliation by the Advisory, Conciliation and Arbitration Service (ACAS), and to enable a tougher approach to the handling of weak cases.

The Department of Trade and Industry (DTI) has indicated that consultation on the implementation of this strand of the Act will take place over the winter, and the introduction of a package of measures is planned for 2003.

In addition to the legislative measures contained in the Act, the government set up an Employment Tribunal System Taskforce to look at ways of making the tribunal system more efficient and cost effective (UK0111105N). This issued its report in July 2002. Its main recommendations include the establishment of a high-level coordinating body to ensure greater coherence within the employment tribunal system and the promotion of best practice, and a greater emphasis on the prevention of disputes. Ministers have said that they will respond to the Taskforce’s recommendations in the autumn.

Workplace dispute resolution

The Act seeks to encourage more individual employment disputes to be settled within the workplace, without recourse to an employment tribunal. It introduces statutory minimum internal disciplinary and grievance procedures for all organisations that employ staff, and measures to promote their use.

The Act sets out a statutory dismissal and disciplinary procedure and a statutory grievance procedure, each involving three stages. The standard dismissal and disciplinary procedure involves:

  1. the employer providing the employee with a written statement of the grounds for action;
  2. a meeting between the employer and the employee to discuss the matter, at which the employee has the right to be accompanied (UK0010195F), and after which the employee must be informed of the employer’s decision; and
  3. an opportunity for the employee to appeal if dissatisfied with the employer’s decision.

The Act sets out a similar three-stage grievance procedure, starting with a written statement of the employee’s grievance.

A modified, two-stage dismissal and disciplinary procedure will apply in cases of gross misconduct. Similarly, a modified, two-stage written procedure will apply to grievances on the part of former employees.

The Act makes it an implied term of every employment contract that the statutory procedures are to apply in circumstances to be specified by the secretary of state in regulations. Contractual procedures that are additional to, and not inconsistent with, the statutory procedures will be unaffected.

Employment tribunals will be required to vary compensation awards by up to 50% where an employer or applicant has failed to use the statutory procedures. Moreover, the Act contains provisions preventing certain categories of complaint from being presented to tribunals until step 1 of the grievance procedure (sending written notice of a grievance to the employer) has been completed and at least 28 days have elapsed thereafter.

Where an employer fails to follow the statutory dismissal and disciplinary procedures a dismissal will be automatically unfair. The Act also specifies that an employer’s failure to follow a procedure other than the statutory procedure will not by itself make a dismissal unfair, provided the employer can show that following the appropriate procedure would have made no difference to the decision to dismiss.

The Act expands the legal requirements on employers to issue employees with a written statement of their main terms and conditions. Among other things, it removes the current 20-employee threshold that applies to the provision of information on disciplinary and grievance procedures. This means that all employers of whatever size will have to provide information on the statutory minimum disciplinary and dismissal procedures in the written statement.

The dispute resolution sections of the Act are expected to be implemented in late 2003.

Equal treatment of fixed-term employees

The Act includes provisions enabling the government to make regulations to prevent pay and pension discrimination against fixed-term employees and implement (UK0108141N) EU Directive (1999/70/EC) on fixed-term work (EU9907181F). The government’s view was that, on account of its Treaty basis, the Directive itself does not cover pay and pensions, so it was necessary to include provisions in primary legislation to give the secretary of state the authority to address these issues by means of regulations.

The Fixed-term Employees (Prevention of Less Favourable Treatment) Regulations 2002 came into force on 1 October 2002. They provide that:

  • fixed-term employees should not be treated less favourably than comparable permanent employees on the grounds they are fixed-term employees, unless this is objectively justified; and
  • the use of successive fixed-term contracts will be limited to four years, unless the use of further fixed-term contracts is justified on objective grounds.

Time off for trade union learning representatives

The Act introduces a new statutory right to paid time off work for trade union 'learning representatives', where the union is recognised by the employer, to carry out a range of duties, including advising union members about learning or training matters. ACAS is currently consulting on revisions to its code of practice on time off for union duties to take account of the new rights. This aspect of the Act is not expected to take effect before 2003. A future EIRO feature will examine the significance of the new rights for union learning representatives in more detail.

Equal pay questionnaires

Employees bringing equal pay claims will have the right to serve a questionnaire on their employers seeking information relevant to their claim or potential claim. This is in line with existing legislation covering sex, race and disability discrimination. Regulations on this issue are due to be laid before the end of 2002 for implementation in early 2003.

Employer and trade union views

The Confederation of British Industry (CBI) and the Trades Union Congress (TUC) have both given mixed reactions to the provisions of the Employment Act.

The CBI has welcomed the Act’s measures to encourage grievances to be resolved in the workplace, as this 'will go some way to addressing the sharp rise in employment litigation over recent years'. However, the CBI is less keen on other aspects of the legislation. In particular, the CBI regards the provisions on time off for union learning representatives as 'a step in the wrong direction', and fears that the inclusion of pensions issues in the fixed-term employment regulations will be 'extremely complex to administer'. The CBI has also expressed concern at the implications of the new rights to time off and family-friendly working, arguing that 'smaller firms will need particular support to deal with [the likely] increase in absences of key staff'.

The TUC has welcomed the enhanced parental leave entitlement and the statutory recognition of the role of union learning representatives. It is also broadly in favour of the requirement for companies to have minimum grievance and disciplinary procedures, but has been critical of the limited nature of the procedures set out by the legislation. Unions are unenthusiastic about other key parts of the Act as well. A resolution adopted at the September 2002 TUC conference (UK0210101N) specifically criticised the Employment Act’s changes to employment tribunal law on the grounds that they are designed to deter employees from seeking to enforce their rights via a tribunal hearing.


The Employment Act essentially represents an uneasy trade-off between the extension of employee rights and measures to limit the use of litigation to enforce them. As a result, it is hardly surprising that neither the CBI nor the TUC is satisfied with the outcome. But there has also been criticism from within the legal profession of the Act’s provisions to limit recourse to tribunal hearings. Unusually, the President of Employment Tribunals (England and Wales), Judge John Prophet, publicly voiced concern that aspects of the legislation might violate the right to a fair hearing guaranteed by the Council of Europe's European Convention for the Protection of Human Rights and Fundamental Freedoms (see 'The Employment Act 2002 and the crisis of individual employment rights', Bob Hepple and Gillian Morris, Industrial Law Journal, September 2002).

To what extent the greater use of workplace procedures will reduce the volume of tribunal applications remains to be seen. The government’s estimate that the reduction will be between 30,000 and 40,000 applications per year has been met with some scepticism, particularly from Labour Party peers during the House of Lords’ debates on the new legislation. In any event, the new employee rights introduced by the Act will themselves add to tribunal workloads, with the right to seek flexible working arrangements perhaps the most likely provision to generate a significant number of claims. More fundamentally, concerns have been expressed that the 'three-stage' statutory minimum procedures are too 'minimalist' to offer effective protection to employees. In particular, they do not meet the accepted standards set out in the current ACAS Code of Practice on disciplinary and grievance procedures.

Despite the extensive changes it introduces, the Employment Act 2002 is unlikely to be the last word on employment law reform during the Labour government’s second term. Trade unions attach much greater importance to the outcome of the review of the Employment Relations Act 1999, initiated by the government in July 2002 (UK0208101N), which will cover a range of important collective labour law issues on which the TUC is pressing for amendments. The DTI has said that it will complete this review in time to enable any legislative recommendations that may result from it to be introduced within the lifetime of the current Parliament. (Mark Hall, IRRU)

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