Government abandons flagship Exit Payments Regulations in advance of legal challenge, but will all affected employees be compensated for their effects?

The government has abandoned its attempt to defend the lawfulness of Regulations designed to limit the level of compensation payments to public sector workers who leave their jobs a few days before it was required to serve Detailed Grounds of Defence to seek to justify the lawfulness the Regulations.  The Restriction of Public Sector Exit Payments Regulations 2020 (“the Regulations”) came into force on 4 November 2020 but will now be revoked and, in the meantime, public bodies are directed to ignore them. The government decision is a considerable victory for the British Medical Association (“the BMA”) which brought a lead claim seeking judicial review.  The BMA was concerned that, amongst other matters, the Regulations cut across terms and conditions which had been carefully negotiated for NHS doctors over many years, including guaranteed redundancy payments.  The Regulations thus undermined the job security of NHS employees. The BMA instructed Capital Law to bring the challenge who, in turn, instructed Landmark’s David Lock QC, leading Nadia Motraghi of Old Square Chambers. The BMA’s judicial review grounds challenged the Regulations on a variety of grounds including asserting that the payments that were included in the Regulations extended beyond those payments that were permitted by the enabling statute.  Permission was granted by Mr Justice Swift and the trial was due to take place in March 2021. However, on Friday 12 February the government announced a change of policy saying that the Regulations would be revoked.  The guidance also confirmed that former employees who had been caught by the Regulations for the brief period when they were in force should be compensated.  The Guidance said:

“If you have been directly affected by the cap whilst it was in force, you should request from your former employer the amount you would have received had the cap not been in place by contacting your employer directly. Employers are encouraged to pay to any former employees to whom the cap was applied the additional sums that would have paid but for the cap”

Thus, employees whose redundancy or other payments were affected by these Regulations have a right to ask their employers to pay them all sums that would have been owing to them if the Regulations had never been made. However, the problems with these Regulations may not be at an end.  David Lock QC explains:

“The BMA sought to persuade the government not to implement these Regulations on the grounds that they were unlawful pending the hearing of this legal challenge.  However, the government was not prepared to take that course and so the Regulations have been in force since November 2020 and will have affected many employees who left public sector jobs since then.

The Regulations have now been withdrawn and so future existing employees will not have their legal rights curtailed by the Regulations.  However, whilst the Guidance encourages employers to reopen settlements based on the Regulations, it is unclear if the Guidance creates any form of enforceable legal right for an affected employee to have a compromise based on the Regulations set aside.  It thus remains unclear what the position will be if an employer insists that any compromise reached against the backdrop of these Regulations should be adhered to.  Any employee in that position should seek legal advice”