A recently leaked/published report commissioned by the Coalition Government recommended radical changes to existing unfair dismissal laws. Naomi Flynn reports some of the proposals and at least one aspect where the media may have got it wrong.
Topic: Unfair dismissal
What: Introduction of a new concept of "compensated no fault dismissal"
When: October 2011
Law stated as at: 1 November 2011
On 26 October 2011, a report by Adrian Beecroft, a venture capitalist, commissioned by David Cameron was leaked to the press. The report recommended the introduction of a new concept in employment law known as "compensated no fault dismissal", which would give employers more freedom to dismiss unproductive or poor performing employees without facing claims for unfair dismissal.
The premature leak of the report/proposals have been widely publicised as "a significant overhaul of unfair dismissal law", with a focus on reducing the number of claims employers face in order to avoid liability for unfair dismissal. The current perception is that employers (particularly in the public sector) are put off firing staff for poor performance, through fear of exposure to unfair dismissal claims.
If implemented, this could have a significant impact for all employers, including in the marketing and advertising sector.
The report suggested that Britain's employment laws were undermining economic growth, as employers are put off dismissing staff due to the amount of unfair dismissal claims that could be brought against them. Employers are also opting to enter into settlement agreements to avoid lengthy and costly tribunal claims, or even allowing unproductive employees to "coast along" without improving their performance or productivity.
These proposals have come shortly after the formal announcement by the Department for Business Innovation and Skills ("BIS") of its intention to increase the qualifying period of service requirements for employees to be able to bring a claim for unfair dismissal from 1 year to 2 years, expected to be in force from 6 April 2012. This announcement was also accompanied by plans to introduce fees for lodging Employment Tribunal claims.
What does this mean for employers?
"Compensated no fault dismissal" claims
It will allow employers to dismiss unproductive and poor performing employees, limiting the employee's claims for unfair dismissal. Under this new proposal, employees would only be entitled to notice pay and a basic redundancy payment, if dismissed for unproductive and poor performance.
The report accepted that there could be a "downside" to these proposals, in that employers could potentially dismiss staff because they "don't like them". The report also suggested that employers may not have to give the employee a reason for the dismissal.
Repeal of the unfair dismissal laws
Although the report recommended the repeal of the unfair dismissal laws, this statement may have been made in error, as the proposals published will only relate to performance based dismissals. In addition, rights given under EU law cannot be repealed. As a result, this may lead to more employees bringing claims for discrimination against their employer instead, if they are unable to bring claims for unfair dismissal.
Employers should be prepared for an influx of employees alleging that they have been dismissed because of their race, sex, religion, disability, age or sexual orientation.
If implemented, the proposals may lead to an increase in discrimination claims. This is an issue for employers as not only is the compensation for discrimination claims potentially much higher but the law is more complex. In addition discrimination claims can generate more media attention and an increased fear of bad publicity.
Another danger of the proposals is that employers could dismiss under performing white male employees, whilst taking no action against underperforming female or ethnic minority employees, in a misinformed attempt protect themselves against discrimination claims.
Therefore in practice, even if the proposals are implemented it may not significantly reduce the number of claims an employer may face. Similarly it is unlikely to reduce the regulatory burden on the employer. Instead it is likely to change the focus by employees to another type of employment claim.
What should employers do?
At the moment the proposal does not have legal effect. Therefore employers have to assume that underperforming employees who have more than 51 weeks' service have the right not to be unfairly dismissed, and follow the correct performance management procedure (including giving warnings and opportunities to improve) before dismissing them.
If however the proposal does come into force, given the likely increase in discrimination claims, employers should take the following steps to limit the risk of underperforming employees successfully claiming that they have been discriminated against:
(a) ensure that they have clear evidence that employees are underperforming; and
(b) that this under performance is communicated to employees at the time of dismissal; and
(c) ensure that the dismissal is well documented.