Opinion: Unfair dismissal claims

Three million people will lose the right to claim unfair dismissal if the government goes ahead with plans to double the qualifying period from one year to two.  George Osborne claims this will give employers an increased confidence to take people on “without immediately facing the prospect of tribunal hearings” [sic]and therefore help reduce unemployment.  But is there any evidence to support that claim?

The government estimates there will be 3,700 to 4,700 fewer claims in future, with savings to business and to the tribunal service, and losses to those who are prevented from bringing a claim.  To give some idea of scale, there were 47,900 unfair dismissal claims last year (not 236,000 as some papers are reporting: that is all claims to employment tribunal e.g. it also includes unpaid wages claims.) But the change would affect far more than those 4,000 people: at any one time there are 3 million people with more than one year’s service but less than two.  Many of them are bound to feel less secure at work if they do not have basic employment protection.  This will not be a popular policy.

So, how many new jobs do the government think will be created?  The extent of the evidence seems to be this, from the Impact Assessment: “Business have told us of their concerns that the existing legislation is too weighted against employers when it comes to the decision to employ people – making it feel a riskier step than some are prepared to take.” Amazingly, the Impact Assessment does not even ask how many new jobs might be created – a mere assertion that this is how employers feelseems to be enough.  There is not even an estimate against which the success or failure of this initiative might later be measured. 

It’s hardly surprising that employers makes these assertions. One thing is certain, employers will gain if fewer people can claim unfair dismissal. But is there any objective evidence that employers look up the qualifying period for unfair dismissal claims before deciding whether to create new jobs? 

Not if you look at the unemployment statistics.  If a longer qualifying period really meant more jobs, then logically a shorter period would have meant fewer jobs when Labour reduced the qualifying period from 2 years to one year in May 1999 – unemployment would have risen.  The figures do not show that.  Unemployment was gradually declining in 1999 and it continued that gradual decline until 2006 – there is no “blip” when unemployment rose following that change.  And that indicates that whatever employers may say, it makes no difference to their recruitment decisions whether the qualifying period for unfair dismissal claims is one year or two.

The question whether there is any objective evidence to support the government’s claim matters legally, because the proposed change will have a significant adverse effect on younger people in particular – and age discrimination is now unlawful.  The Equality Impact Assessment found that out of 2 million young people aged 18-24 who can currently claim unfair dismissal, 724,000 would lose that protection overnight, i.e. 36%, far more than the overall figure of 10%.  So prima facie there is indirect age discrimination.  Can the decision be objectively justified as a proportionate means of achieving a legitimate aim?  

In Seymour-Smith no.2 [2000] ICR 244 (an indirect sex discrimination claim) at issue was whether an earlier increase to 2 years (under Thatcher) was justified (a) at its inception in 1985 and (b) in 1991 when the claimants were dismissed.  The same justification was relied on, job creation.  The House of Lords accepted that there was “some supporting factual evidence” to support that case in 1985, and it was only over time that the disparate impact on women became apparent.  Therefore, the change was (just about) justified both in 1985 and in 1991.  The impact should be monitored, however, because “the benefits hoped for may not materialise”. 

The present government seems to be proceeding on the assumption that because the House of Lords accepted in Seymour-Smith no.2 that a 2 year requirement was justified between 1985 and 1991, it is fine to re-introduce it now.  However, there are two key differences.  The first is that in 2011 we do impact assessments, so we already know that the policy will have a significant adverse impact on younger people. And the second is that we already know from the unemployment statistics that there is no correlation between the qualifying period and unemployment rates.  The benefit contended for is entirely specious.  Therefore in my view it is arguable that the impact on young people cannot be objectively justified and the increase to 2 years is unlawful from the start.

Anya Palmer is a barrister at Old Square Chambers and specialises in employment law