Government proposals on employment law reform: Has Vince Cable snapped?

January 9, 2012

This article was written for and first featured on Fresh Business Thinking

Many employers feel that it is all too easy for an unhappy employee to bring a claim in the Employment Tribunal. It is free to start proceedings in the Tribunal, the claim form is available online and is relatively easy to complete, there is an abundance of free employment law advice for claimants, and even if the employee eventually loses his claim he doesn’t need to worry about paying the other side’s legal fees. The effect is particularly damaging for SMEs because claims often require senior management to give up large amounts of time preparing for and then attending the Tribunal hearing.

The Government has taken notice of employers’ concerns and Vince Cable recently confirmed a range of proposals designed to reduce the number of complaints which end up in the Employment Tribunal. Below is a brief summary of some of the proposals, and our views on why they are unlikely to be of real benefit to employers.

  • Protected conversations to allow “frank” discussions about work place issues which cannot be repeated as evidence in Tribunal. This is a twist on existing “without prejudice” discussions. There will be limits on what can be said: anything discriminatory will not be protected, so telling an older worker that he should consider retirement because he is “past it” would be disclosable evidence. In practice, there will be arguments as to whether or not the discussion was truly protected, making disputes more complex, time consuming and costly
  • Pre-claim conciliation with Acas. Anyone who has used Acas to try and settle a dispute will know that they can play a vital role but they are already under-resourced. Forcing parties to try and settle via Acas before the claim proceeds to the Tribunal will only increase time and legal costs for all parties. One key factor in settling disputes is litigation fatigue, which will not apply at this early stage in the process.
  • “No-fault” dismissals for employers with fewer than 10 employees. Although we have yet to see the detailed proposal, it seems that micro employers would be able to fire employees for fixed compensation and without the risk of unfair dismissal claims. We do not know how much the compensation will be, and the risk of discrimination claims must remain open, but one big side-effect could be that employees are discouraged from joining micro employers if they can gain greater security by joining a slightly larger business.
  • Extension of the qualifying period to bring unfair dismissal claims. Currently an employee needs one year’s service to claim, but this will be extended to two years in April 2012. This proposal is unlikely to be as beneficial for SMEs as it might first appear. The Government claims that this will give employers longer to decide whether it was the right decision to recruit someone. In our experience, employees who fall short of the qualifying period often try and claim discrimination or whistle blowing for which there is no qualifying period. Defending discrimination and whistle blowing claims, however spurious, is far more costly and time consuming for employers.

Finally, the Government still hasn’t backed the one proposal we believe would force employees think twice about before suing: paying their employer’s fees if they lose their claim. This is the general rule in High Court litigation and is a big factor in discouraging spurious claims. In a survey conducted through www.hrlaw.co.uk by Fox Williams, over 60% of respondents felt increasing the amount of costs the employer can recover from an unsuccessful claimant would be likely to result in early settlement of claims. Will an employee bring a dubious claim if it will cost them tens of thousands of pounds if they lose? Surely this is the simplest solution to cutting the number of Tribunal claims.


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