Claims game

The coalition's proposals for employment reform announced by Vince Cable on 23 November amounted to something of a curate's egg. The business secretary's speech heralded the publication, later that day, of BIS's response to its Resolving Workplace Disputes consultation.

Perhaps the main proposals concern reforming unfair dismissal law. There are two pressures here to which the government is responding. First, a concern that growth is being stifled by the reluctance of some employers to hire '“ blamed on difficulties in dismissing if the recruitment does not work out. Second, the cost of the tribunal system. Restricting unfair dismissal claims would, of course, help.

A key proposal is to increase the qualifying period from one to two years. Unfair dismissal law has its limitations but it is these limitations that should be addressed, not the arbitrary removal of ten per cent of the workforce from protection. Conversely, the increase in the qualifying period is likely to have the effect of pushing people into bringing discrimination or other complex and costly claims where they believe they have been wronged by their employer. It is also likely to increase insecurity among the workforce who, for two years, will be in fear of being dismissed on a whim. We need a secure, skilled workforce in which employers invest and train, while at the same time a simple and predictable system for addressing the breakdown of the relationship.

A second key proposal '“ the idea of compensated no-fault dismissals for micro employers '“ is, on the other hand, an interesting one. This was floated, albeit for all employers, not just the smallest, in the leaked Beecroft report. Beecroft's proposal envisages a compensatory payment equal to statutory redundancy. A system that avoids the uncertainty of compensation and unpredictability of outcome, yet provides a sufficient payment to provide security for employees and a deterrent against arbitrary dismissal, is worth further investigation. The scheme should also find a way to encourage employers to remedy performance problems or investigate allegations of misconduct, perhaps through different levels of compensation payment.

The most significant development is consultation on the introduction of fees to file claims or to proceed to a hearing. The concept of fees is not necessarily a bad thing. Government announcements have highlighted the need to deter weak claims. However, the reality is complex. Some, but not many, claims are brought cynically by claimants relying on cost and potential reputational damage to spur the employer to settle. Equally, in some cases, employers can coerce a claimant with a meritorious claim to withdraw in light of the cost, complexity and reputational damage of pursuing a claim. In other cases, claimants with unmeritorious claims may genuinely believe that they have a good case, which is unsurprising bearing in mind the complexity of employment law. The level of fees must not be too high to deter valid claims.

Ed Davey, who accompanied Cable at the announcement, accepted that there would have to be provision for those with limited resources to be exempted from fees. It must be questionable, particularly bearing in mind that many people who bring employment tribunal claims are, by definition, out of work, whether or not a system of administering fees might be more costly than the revenue gained.