Playing by a new set of work rules

Lawyers are anticipating an avalanche of employment cases as the Government introduces a number of amendments to the laws governing unfair dismissal.

The new rules, introduced under the Employment Relations Act 1999, are designed to improve the employee's lot by forcing employers to clean up their disciplinary procedures and create a better working environment.

The new limit of unfair dismissal awards has increased from £12,000 to £50,000. The limit will be indexed to keep awards in line with inflation.

The amendments also improve protection for trade union members and end the use of waiver clauses in fixed-term employment contracts of more than 12 months duration.

But will this lead to a bonanza of work for employment lawyers? How will the rules affect the process of negotiating a settlement? And do lawyers consider £50,000 to be an appropriate figure, or does this limit threaten small businesses while failing to compensate the high-earner?

David Cockburn, employment partner at Pattinson & Brewer, says: “It is a considerable step forward but curiously it is also a step back.

“The Government is granting rights equivalent to those the Tories introduced in 1971, when compensation was introduced at the same level. It has been eroded over the years because it did not keep up with inflation and this is basically a catching-up exercise rather than a quantum leap forward.

“It will possibly lead to more claims but not significantly more. Only relatively few cases were stopped by the £12,000 ceiling and statistically most will be unaffected.”

But he adds: “I think it will create more work for City employment lawyers because the group it will hit will be the highest paid, particularly City types who are victims of financial institution shake-outs. Middle earners may be affected if you take loss of pension into account and this means employment lawyers will have to brush up their pensions expertise.”

Cockburn believes the awards should be unlimited because unfair dismissal rulings are rare. “The applicant has to prove they have suffered a loss and should be able to claim the whole of that loss,” he says.

Christopher Osman, head of employment at Clifford Chance, disagrees. He says: “If unfair dismissal claims were uncapped, it would become very difficult for employers and would open the floodgates for claims.”

Osman predicts the changes will affect claims across the board. “This will raise the level of settlements because it provides a target for people to aim for and it will make the negotiations more lengthy and arguably more difficult. That will cascade down and haul up the lower echelons by their boot straps as well because it will raise expectations.

He says: “There will be an increase in work and an increase in tribunal cases. And because there is more to play for there will be more use of contingency fee arrangements and more of an inertia about settling the cases.”

Fraser Younson, employment partner at McDermott Will & Emery, says: “This will result in more cases brought and more cases fought.

“Whereas a lot of companies have tended to offer employees a £9,000 payout to get rid of them – these cases will now be worth fighting.

“A limit of £50,000 will increase the attractiveness of contingency fees, currently used by a handful of solicitors. For long-serving employees, tribunals working out the pension loss will reach figures near to the limit. For example, for someone employed for 45 years, it could be £20,000 or £30,000.”

Younson says the £50,000 cap is a “compromise” but adds: “Where do you draw the line? If a government is to be seen to be good to industry then it's probably a sensible place to make it. Employees know when someone in the business is getting money and companies don't want to be seen to be a fruit machine.”