Cable to prevent settlement offers being used against employers in unfair dismissal claims

Business secretary Vince Cable has told the Commons that an additional clause will be added to the government’s Enterprise and Regulatory Reform Bill ensuring that offers to settle cannot be “used against” employers in unfair dismissal cases.

During the bill’s second reading in the Commons last night, Cable said the government wanted to encourage parties to reach an agreed solution at an earlier stage.

He said the new clause would “facilitate the use of settlement agreements, making it easier and quicker for employers and employees to come to an agreed settlement where an employment relationship is not working”.

In answer to a question from Plaid Cymru MP Jonathan Edwards, Cable said he could give a “categorical assurance” that the government would not be going ahead with the Beecroft report’s recommendation on “sack-on-the-spot”.

Adrian Beecroft, a leading Conservative Party donor and venture capitalist, recommended that a system of ‘no-fault dismissal’ be introduced to allow businesses to get rid of underperforming staff.

Though some Conservatives are said to back the plans, Lib Dems in the coalition are strongly opposed (see solicitorsjournal.com, 22 May 2012).

Chuka Umunna, the shadow business secretary, said employment rights had been used as a “political football” by the government and between the two governing parties.

He said ministers and those briefing the media on their behalf should think about the “huge worry” that this was generating among workers.

Umunna said the bill would give the business secretary the power to cap unfair dismissal awards at between £26,000 and £78,000 or one year’s earnings, whichever was the lower.

“The practical effect of the proposal would be that those on average or above-average earnings – middle income earners in particular – would not be properly compensated if they were treated unfairly by their employers.

“Let us be clear who we are talking about,” Umunna said. “This would affect accountants, architects, chartered surveyors, insurance brokers, lawyers and mechanical engineers, as well as many other public service professionals.”

Later in the debate Norman Lamb, under-secretary of state for business, said the new clause would ensure that offers of settlement “cannot be used against an employer, any employer, in an unfair dismissal case, which will give businesses the confidence to talk to their employees about bringing the relationship to a swift end through the use of a settlement agreement”.

Lamb went on: “We want to ensure that all businesses, including small and medium-sized businesses, can use those agreements. If there is no agreement, the employee’s rights are still protected. They have to work together to ensure that the employment relationship is maintained.”