These employment law reforms strike just the right balance

Proposals by the government to reduce the maximum amount of compensation for unfair dismissal claims could  end up being just enough to discourage spurious claims while preserving access to justice for those who are treated unfairly by their employer.

Under the current regime, most employers believe that the balance of the law is in favour of the employee when it comes to unfair dismissal claims. After all, the prospect of securing a compensation award of anything up to £72,300, for a claim which is free to pursue, can be hard to resist for a disgruntled employee who has just lost their job. Furthermore, the fact that employees can lodge a claim without even raising their complaint with the employer beforehand adds to the sense of unfair bias in the current system.

The proposals set out by Business Secretary, Vince Cable, which are now subject to consultation, will go some way to re-balance the situation, while protecting every employee’s right to access justice.  Of course, the Government will also be hoping that the changes will also make employers feel a bit more confident about hiring new staff.

The most noteworthy change proposed is the move to reduce the compensation award for unfair dismissal and cap it at one year’s salary. This seems a  sensible proposal, which, when combined with the new payments that employees will be required to make when bringing a claim from next April, should be sufficient to discourage most spurious claims.

The proposed use of ‘settlement agreements’ that allow staff to agree to leave their employer with a pay-off and no threat of a tribunal case, may also be useful. However, employers shouldn’t be tempted to use these agreements too readily so that they avoid creating an impression that the employer will manage exits with a cheque. The law is there to be used and employers should remember that they still have the right to address performance issues openly and directly with members of staff and to make dismissals where necessary.

The biggest positive linked to the use of ‘settlement agreements’ is likely to be its encouragement for employers and employees to discuss and resolve performance-related issues at an earlier stage, which should ultimately minimise the frequency of workplace disputes.

One recommendation made by the Beecroft Review that Cable has confirmed is definitely not going ahead is the introduction of no-fault dismissals. Clearly, it was felt that this would be a step too far and could compromise workers’ rights. Businesses need to feel more confident about taking on more staff, but permitting them to fire at will would ultimately have a negative impact on the world of employment.

Another significant part of the announcement is the proposed streamlining of the employment tribunal system. As most users know only too well, the system is in urgent need of an overhaul. The powers of filtration that exist are currently under-used and the system itself is seriously under-resourced. An ineffective tribunal system is in nobody’s interest and hopefully lessons can be learned from the Employment Appeal Tribunal system which is altogether more robust and user-friendly.

All in all, these proposals seem to have been well-considered and while only time will tell, they appear to have struck just the right balance in terms of freeing employers to recruit without fear of blocking workers’ access to justice.

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• Tom Hank

  it about time, long overdue, far to many people have been getting away with poor performance specially in the education system, at university and college.

• http://twitter.com/HRBullets @HRBullets

  When the median UFD award is less than £5K I think it unlikely that employees seriously believe they have a “prospect of securing a compensation award of anything up to £72,300″ unless they are spectacularly badly advised. “The government will also be hoping that the changes will also make employers feel a bit more confident about hiring new staff” – where’s ANY evidence that employment regulation puts employers off hiring new staff? A recent survey showed that only 12% of SMEs actually worried about the cost of getting rid of new employees if things go wrong or the employee doesn’t perform.

• http://www.yahoo.co.uk/ Firozali A.Mulla

  Fix
  the employments first the leaders ought to do that ANTWERP (BELGIUM): At 29,
  Samira Ahidar just got a permanent job, her first. Ahidar, who still lives
  with her parents, dropped out of school a decade ago and her adult life has
  been dominated by the search for work. She would still bejobless if it were not
  for a job creation scheme that employs her at an elderly care home. “I’ve
  no idea where I’ll be in five years time,” said Ahidar, dressed in an
  orange apron that comes with her new role. “It is so hard to find work,
  you feel like giving up.” Ahidar does not live in Greece or Spain,
  countries where as many as one in two young people are without work, but in the
  wealthy Belgian port city of Antwerp. With its stunning 16th-century Gothic houses,
  the city is a world centre for diamond trading and boasts a cutting-edge
  fashion industry. It also has a fast-growing number of unemployed twenty something. Youth
  unemployment is notoriously a problem of southern Europe. What is less obvious,
  as the euro zone slips into its second recession in just three years, is the
  scale of the problem in the north. made on the habits of the poor by the
  well-housed, well-warmed, and well-fed. -Herman Melville, novelist and poet
  (1819-1891)

  Important for Spain, since borrowing costs
  above this level are seen as unsustainably expensive. I thank you
  Firozali A.Mulla DBA

• charlesby

  There is no need to reform unfair dismissal. The main problem is with Tribunals themselves which are overtly biased towards employers, preventing anything like the proper compensation being awarded to employees. Not only that but they are frequently incompetent as to the law, especially as to the construction of any agreements that come before them.

  Reform in the area of sex and race discrimination to prevent ridiculous awards is what is required, as it is these awards that bring the employment laws into disrepute rather than unfair dismissal, which can only be claimed after one full year’s employment in any event.

  Most judges and Tribunal chairmen, let alone employees, have little or no idea of the legal and practical distinction between compromise, settlement and unfair dismissal judgements, but for the employee the distinctions can mean the difference between re-employment and lifelong unemployment, as they affect market perception.

  Settlements with no admission of liability can be disastrous for employees where they are thrown off the premise without obtaining further employment first. In any case the law already provides for such settlements under s.203(2)(e) Employment Rights Act[1996] so there is no point in changing the law. Most employees who have been constructively dismissed, or dismissed in any other manner, would be strongly advised not to enter them, due to the fact it will then become almost impossible to convince prospective employers that the reason for leaving was other than fair dismissal.

• Farweasel

  When did the Independent become a mouth-piece for the Tea Party?

  Or did you just uncritically print what LibDem/Conservative central office sent you as a pre-prepared, off the shelf filler item?

  The median award for unfair dismissal is less than £8,000 (I think its actually less than £6,000 but unlike you I’m being honest and cautious).

  The Tribunals have been lifted out of reach for many potential claimants by doubling the qualifying period from 12 months to 24. That’s a charter for hire & fire, treat people like disposable commodities. Any half competent employer can assess an employee’s capability in under 6 months, claims to the contrary are a thin disguise for their real agenda. The driver for this is simple short-term greed.

  There are 2 unintended consequences likely from it:
  * Unfair dismissal claims packaged as unlawful discrimination claims (and frankly, good luck to ‘em as its a sensible response to an unfair barrier).
  * Possibly a return, gradually, to the type of Trades Union activities that typified that movement’s very early days when the law was against them but a despairing, downtrodden workforce had so little to loose they organised themselves for mutual protection.
  (And yes eventually it went over the top and the 1970s were a fiasco, but look where and why it began. What’s that about the results of ‘not learning the lessons of history’)?

  I understand why people despise Clegg for selling-out.
  What I find confusing is why they fail to grasp the significance of what Cable is doing too. The words ‘brown-nose’ vie with ‘turncoat’ and ‘hypocrite’.

• Farweasel

  Sorry charlesby, I think you may have tripped a record of being well meaning but wrong on every apparently factual statement. And yes even the point about settlements ….. Those depend upon how intelligently they are put together – ‘tho I’d agree with you often they’re not well done. And that then is often disastrous. But often, not always. Don’t deter people who might benefit. Do emphasis the need to get ‘em right.