Nick Hurley, employment partner, Charles Russell
There’s better things to change than unfair dismissal law
15 November 2010
4 August 2014
19 December 2013
25 June 2014
23 April 2014
18 March 2014
Lord Young’s recent interview on Radio 4’s Today programme (1 November) sparked a great deal of debate.
In the interview Lord Young, tasked with advising the Government on cutting the burden of red tape on business, was asked about plans with regard to unfair dismissal protection. Specifically, he was asked if it was possible to see the qualifying period, currently set at one year, increased to “two or three years” to enable businesses to dismiss
people more easily.
He confirmed that this was being contemplated and that the measure had in the past helped in improving the employment figures.
While it is true that eligibility for bringing claims of unfair dismissal has changed over the years (it began at six months, was increased to a year, then two, and finally back to a year again) it does not make sense to increase this back to two years.
Unfair dismissal is the most basic of the suite of statutory employment protections and provides a sensible
remedy against the actions of a capricious employer. Compensation awards, although capped at £76,700, tend to be low, with the median award standing at only £4,900, based on the latest statistics. It is therefore debatable whether lengthening the eligibility requirement would reduce barriers to employment or limit the perceived compensation culture and cost to business.
Unfair dismissal claims have increased year-on-year, but so too have nearly all types of discrimination claims. With the exception of sex discrimination, claims regarding race, religion or belief, sexual orientation, disability and notably age have increased steadily. Protection applies for these claims from day one of the employment relationship, and also
applies before and after employment.
Also, with compensation for discrimination technically unlimited and, in fact, more costly to businesses, arguably these complaints pose a much greater threat.
So why target unfair dismissal? This is not just due to the valid social policy reasons that underpin discrimination
law, but also because equality rights are enshrined in European legislation, which is nigh on impossible for the Government to unravel.
In contrast, it would only take an order from the Minister for Employment Relations to bring about a change in the qualifying period for unfair dismissal.
Ironically, a likely consequence of increasing the qualifying period would be that prospective claimants who lose their jobs with less than two (or three) years’ service are more likely to frame their claims around discrimination to claim protection.
This commonly occurs now for those with less than a year’s service.
These claims are often contrived and unmeritorious. Therefore, such a change is likely to bring about the opposite effect to that which is desired.
A better approach is to consider measures that will meet the stated objective properly. If this is to improve
the employment figures, I suggest the Government should be looking at ways of cutting the direct costs of employment. Reducing employers’ National Insurance contributions might not cut the deficit, but would help in job creation.
If the objective is to weed out vexatious claims, then measures to deter these could be deployed, such as greater scope to award legal costs and the increased use of deposit orders. Such measures would be far more effective in balancing access to justice against cost to business.
As Lord Young carefully stated in his interview, he is looking at a number of options and will listen to views. Let’s hope this is one change that is rethought, as it serves nobody’s interests.