Work it out

By publishing its consultation paper Resolving Workplace Disputes, the coalition government has at last shown its hand in relation to its employment law agenda. Its philosophy is clear '“we need growth to create jobs and to kick-start the economy, and the employment law reforms of the past decade or so are 'red tape' that need to be relaxed to encourage employers back into the recruitment market.

Depending on your politics, this philosophy may be understandable. But on analysis, the actual proposals put forward have real potential to backfire, every bit as had some of the reforms introduced by the last Labour administration.

These proposals have now been extensively reviewed by the Employment Lawyers Association (ELA) and their report was sent in to the Department for Business, Innovation and Skills (BIS) last month. It makes for interesting reading.

The government's headline proposal, to increase the qualifying period for unfair dismissal claims from one year to two, may sound attractive from its perspective. On some estimates it could remove at a stroke approximately 5,000 cases that come before the Employment Tribunal each year (where the employee has between one and two years' service).

However, ELA believes it is more likely to increase the headache for employers because where employees are prevented from bringing an unfair dismissal claim they look to alternative remedies, and these would inevitably include a claim for discrimination, or whistle blowing, if, on the facts, these might be available. Such claims are more complex, have potentially unlimited damages, and are far more costly to defend than straightforward unfair dismissal claims.

The government also wants to levy fines upon employers who breach their employment law obligations. In theory, the fines will not go to the claimant, but to the government. However, the reality is that in any pre-trial negotiation, a claimant is bound to look to an employer to provide 'compensation' to match the employer's potential financial exposure at tribunal. This could well mean that if the case settles early an amount representing the potential 'fine' would wind up in the pockets of the employee, rather than the Treasury.

Damp squib

The government says it wants to head off claims by increasing the powers of the tribunal to set 'deposits' which claimants need to make before they are allowed to proceed, and to beef up the powers to make orders for costs. It proposes the maximum deposit be increased from £500 to £1,000 (which ELA supported, since it was roughly in line with the increase to the national minimum wage over the same period) and to increase the current cap for fixed costs awards from £10,000 to £20,000.

As regards the latter, we think this is likely to prove something of a damp squib for employers. Currently, average awards are no more than £1,000, and median awards £2,288. So an increase from £10,000 to £20,000 is hardly likely to make employees quake in their boots. Also, the numbers of costs awards being made these days continues to be paltry. Save for relatively exceptional cases, we simply do not have any kind of adverse costs regime in the tribunal '“ however much the government seeks to suggest that we do.

Arguably, the government's premise '“ that, by making it harder for employees to bring claims, they will thereby encourage employers back into the recruitment market '“ is flawed from the start. In ELA's view, employers decide to recruit principally for one reason only: operational need. In taking that decision, they are not going to be significantly affected by what may happen if the arrangement does not work out as they might have hoped.

What might make a real difference, however, is for the government to provide employers with more significant protection when they seek to have a without prejudice discussion with an employee so that they may do so without the fear that it may provide employees with an opportunity to claim they have been 'constructively dismissed', or that any procedure that may be used to bring about the termination of their contract was fundamentally flawed as a result. This has been an area of some difficulty for employers, and is something we have suggested BIS might now focus upon.

Since this is probably the most important employment-related consultation the current administration has embarked on to date, its response is awaited with much interest. The government may have set out its stall '“ but will it now stick to it?