November 2011

In its mission to jump start the UK economy, the government has recently announced some controversial employment law reforms, including increasing the qualifying period for unfair dismissal from 1 year to 2 years and the introduction of fees to bring a tribunal claim.

At first, it might seem to be the perfect and most obvious solution; that by diluting employees’ rights, thereby reducing the burden of ever-expanding employment law on employers this should in turn boost recruitment, improve job prospects and Get Britain Working again.

So, terrific news all round for employers and the economy.  Or is it? 
On closer examination, it seems that the reforms are unlikely to have the effect the government is hoping for.

Increase to unfair dismissal qualifying period

Currently, an employee can only bring a claim for unfair dismissal if they have worked for their employer for one continuous year.  From April 2012, this qualifying period is going to increase to 2 years.  This means that for up to 2 years, an employer will be able dismiss an employee without having to give a reason, or go through any procedures first.

The expectation is that this will have the effect of fewer unfair dismissal claims being brought, thereby reducing the strain on the tribunal system and the public purse and lessen the expense for employers having to defend these claims.

In reality, it is unlikely that this increase will have a significant effect on reducing tribunal claims.  In fact, it is likely that employees will opt to bring other claims arising from their dismissal that do not require any qualifying period.  For instance, employees with under 2 years’ service will still be able to bring claims for automatic unfair dismissal (linked to whistle-blowing, pregnancy/maternity, health and safety or trade union membership) and discrimination.  All of these types of claims are potentially more expensive to employers, both in terms of the length of the proceedings and the likely compensation if they lose.

Also, the potentially detrimental effect on employer-employee relations should not be underestimated.  A chief adviser from the Centre for Dispute Resolution has recently reported that the increase in qualifying period is likely to reinforce “a hire and fire culture…which would be detrimental to fostering a culture of genuine engagement and trust between employers and their staff and potentially harmful to the long-run performance of the UK economy”.

Tribunal fees

The Government is also consulting on a new system of fees for bringing tribunal claims.  The as yet unconfirmed reports are, that these fees are likely to be £250 for issuing a claim, £1,000 to fix a date for the hearing and higher fees if the claim is worth over £30,000.  If the employee wins their case, they get their fees refunded and there may be fee exemptions for some. 

In principle, this would appear to be an effective way to discourage employees from bringing weak claims, and to discourage those litigants that are simply out to see whether they can get a nuisance-value settlement.

However, there are various reasons why the introduction of fees is likely to be counterproductive, ranging from the huge administrative burden for the tribunal system itself in administering the collection and refunding of fees, to the inevitable detrimental effect on access to justice.

The present tribunal system provides an easily accessible, informal and inexpensive procedure for individuals to resolve employment disputes.  There will be many employees who will simply be unable to afford to bring their claims, or will be unwilling to take the risk even if they have reasonable prospects of success.  The present system already has a deterrent for employees bringing weak or vexatious claims; they face the risk of having to pay the employer’s costs of up to £10,000 if they lose.  Arguably, this is enough of a deterrent. 

A vast number of all tribunal claims settle before reaching a hearing.  As a result of the introduction of fees, employers will probably end up having to pay significantly more than they do now to settle a claim.  A typical nuisance value claim would need to be at least £1,250 to make the settlement worthwhile for an employee who has already paid out tribunal fees.  With this disincentive to settle, more claims may find their way to the tribunal door. 

Compensated No Fault Dismissals?

According to pages from a recently leaked confidential report commissioned by David Cameron, one particularly radical and highly controversial proposal might be that the right to claim unfair dismissal should be replaced altogether by a “Compensated No Fault Dismissal” whereby employers could dismiss without reason and with basic redundancy pay and notice pay. 

We will have to wait and see whether anything comes of this and whether the government has any other measures in store. 

For further information or advice about this article, or any other employment law issues, contact Pritti Bajaria on 01689 887 846 or email pritti.bajaria@cwj.co.uk