APRIL 4, 2012

Government shake-up of employment law – making it easier for employers to dismiss staff?

A combination of legislation in process and Government consultation looks set to make life easier for employers, particularly when it comes to dismissing staff.  Last month, the Department for Business Innovation & Skills (BIS), launched a “Call for Evidence”, as part of an informal consultation process.

The Government’s proposals, first floated  in a controversial report by the venture capitalist Adrian Beecroft in November last year, were intended  to make it easier for businesses to hire, manage, and sack staff.  Since then, the Liberal Democrat influence in the Coalition has succeeded in watering-down a number of the proposals.

Nevertheless, we can fairly anticipate some significant shake-ups in employment legislation and tribunal processes in the next 1 to 2
years, and these look set to be largely to the benefit of employers.

On two issues in  particular, the Government is currently inviting comments from any employers or  individuals, and this is open until 8th June this year.

If you  want to submit your views, you can do so now at: http://www.bis.gov.uk/Consultations/call-for-evidence-dealing-with-dismissal

Here are some highlights of what is on the horizon:

Coming into force this week:

  • We return to a 2 year qualifying period for  unfair dismissal.  This had been reduced to 1 year under the previous Labour Government.  Note that the Order will only affect those who begin employment on or after 6th April 2012.
  • The maximum limit for costs awards in Tribunals will increase to £20k.  (But note the circumstances for this are limited.)
  • Changes in Tribunal procedures, eg including allowing judges to sit alone in unfair dismissal cases

Legislation expected over the next 12 months:

  • Simplification of Employment Tribunal rules of procedure.  The Government’s view is that the current rules are voluminous, inflexible and hinder the effective management and disposal of cases.  The intention is to create a “streamlined procedural code”.
    We await the results of a review which is currently underway.
  • The introduction of fees for tribunal claims – Employers have complained that the current system, where there are no fees and (in most cases) no award of costs against the losing party, significantly disadvantages businesses, because employees have no real disincentive to bringing claims of little merit.
  • A new right for tribunals to award costs against the unsuccessful parties.
  • Early conciliation of tribunal claims – all claims will be sent to Acas before they can be lodged with the tribunal.  The aim is to speed up conciliation and reduce the burden on tribunals.  However, it could be argued that unless the Government significantly increase Acas’s resources, this measure will simply shift the delay from tribunals to Acas.
  • An additional discretionary power for tribunals to levy financial penalties on employers found to have breached employment
  • A simplification of the rules around compromise agreements, in order to facilitate their use and encourage uptake.

Consultation open from now until 8th June 2012:

1. Simplification of dismissal process for small businesses –  the Government has taken criticism on board that the required processes for dismissal, set out in the 2009 Acas Code, are not always practicable for smaller employers.  For example, the required series of warnings before an owner/manager can safely dismiss for poor performance.   BIS is particularly interested in people’s views as to whether an alternative model, such as the Australian “Small Business Fair Dismissal Code” might work better.

2. “Compensated no fault dismissal” – a business with fewer than 10 employees would be able to dismiss an employee where no fault was identified, provided that it paid a set amount of compensation to the employee.  The employer would not be required to go through a formal dismissal procedure.

Consultation expected later this year:

Protected conversations – In an interesting move, the Government is considering the introduction of what would be known as a
“protected conversation”, meaning that employers would be able to have an open and frank conversation with an employee without worrying that it will end in a tribunal claim.

The conversation could be started at the request of either the employer or the employee.  But in practice it is likely to be employers who gain the most benefit.  At the moment, it is not possible for an employer to have a truly “off the record” conversation with an employee.  Even merely suggesting the possibility of a compromise agreement to an employee can leave the employer with a claim for constructive dismissal.  This can cause much frustration for employers, particularly where they suspect that the employee will be willing to accept the terms that would be offered.   In a  “protected conversation”, an employer will be able to offer a compromise agreement, and discuss the potential terms of it.

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Roz Goldstein

Roz Goldstein


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