Govt's employment U-turn

Employment lawyers have welcomed a government U-turn on abolishing the ceiling for unfair dismissal compensation.

The Department of Trade and Industry (DTI) White Paper issued in May proposed abolishing the £12,000 ceiling on compensation claims for unfair dismissal, which would have brought unfair dismissal into line with both sexual and racial discrimination claims.

But DTI Secretary of State Peter Mandelson bowed to pressure from campaigning employers' groups last week and indicated he would instead raise the ceiling from £12,000 to £50,000.

Eversheds' London head of employment Elaine Aarons said employers had feared “enormous” claims stretching to hundreds of thousands of pounds, since employment case law showed employees could claim for discretionary bonuses and share options.

Lawrence Graham's head of employment law, Yvonne Gallagher, said the new ceiling would “give more incentive to employees to bring claims, and enable clients to use conditional fee arrangements for cases which would otherwise have been borderline”.

The White Paper also cuts the qualifying period for unfair dismissal claims from two years to one, and strengthens the rights given to employees dismissed for taking part in lawful industrial action.