“Having it both ways” – reactions to employment reforms

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The Secretary of State, Vince Cable, has today announced a package of reforms that will lead to further changes aimed at helping reduce burdens on, and increase certainty for, businesses, especially small businesses. The Government says the measures respond to business concerns that more needs to be done to help them tackle issues at the end of the employment life cycle and aim to:

create certainty about employers’ liabilities;
provide clarity on dismissal and Tribunal processes; and
give business confidence to use settlement agreements to end employment relationships where this is necessary, thereby avoiding the Tribunal process completely.
These measures, says the Government, will reduce risks to employers, increase their flexibility to deal with workplace issues and decrease the costs of resolving disputes. Business will have the support to resolve workplace disputes earlier and, if they proceed to Employment Tribunal, they will experience a quicker, more efficient process.

However, business groups have claimed the proposals are trying to please too many people and even Vince Cable himself has admitted that the Government is attempting to “have it both ways” by making it easier for employers to sack workers while attempting to protect employee rights.

Specific proposals include:

Reducing the upper limit on compensation payments for unfair dismissal from its current level of more than £72,000.
Committing employers to offer workers a ‘settlement agreement’ to leave before a formal employment dispute arises. Under such an agreement, workers leave with a compensation payment and the employer gets legal protection against the dismissal being taken to a Tribunal.
Proposals to streamline employment tribunals by making it easier for judges to dismiss weak cases.
Responses to its call for evidence on the TUPE rules, when staff transfer to a new employer.
Recommendations on how to improve guidance for small businesses on the ACAS code of practice on discipline and grievance.
The Government also responded formally to the call for evidence on proposals for compensated no fault dismissal for micro-firms. Based on the evidence presented by business the Government will not be taking forward the proposal.

The CIPD says it welcomes the end of ‘no-fault dismissal’ proposals but cautions that alternative plans to make it easier to fire workers risk undermining good performance management practices.

Commenting on the announcements, Mike Emmott, Employee Relations Adviser at CIPD, said:

“The idea that businesses should be able to manage the performance of their employees effectively, without fearing extortionate costs and a time consuming process, is a good one. However, the proposed reforms must not undermine the principle of mutual trust and confidence that lies at the heart of positive and productive employment relations.”

Speaking about some of the other proposals, he continued:

“The reality is that employment relationships sometimes don’t work out and compromise agreements can be used as a quick, face saving way out for employees and employers. However, we will be responding to the Government consultation to ensure that settlement agreements can’t be used as a first port of call by employers simply because an employee’s ‘face doesn’t fit’. Employers need to understand that there is no substitute for good performance management practices and settlement agreements will do nothing to protect them from discrimination and constructive dismissal claims if they act improperly.

“It is not clear how much of an impact the reduction in the limits to payouts for unfair dismissal will have. The average award for unfair dismissal in 2010-11 was about £9,000, well below the average earnings of most people. Furthermore, employers need to be aware that this cap will not apply to claims brought against them in discrimination cases, where the cap on payouts is unlimited.”

Katja Hall, CBI Chief Policy Director, said:

“Businesses want to see progress on key areas of employment law reform. The Government has identified the right issues to address – unclogging time-consuming Employment Tribunals, encouraging early fair settlement of disputes and reform to TUPE and redundancy rules that heap red tape on to business.

“As in other areas of government policy, what really matters now is taking action to deliver real change on the ground. Firms will judge the Government’s performance on how quickly and effectively these changes start to have a positive impact on their businesses, not the state of the debate in Whitehall.”

However, some employment lawyers have expressed concerns that the proposals contain nothing new.

Louise Taft, Employment Lawyer at Prolegal, said:

“As predicted by many employment law commentators, today’s announcement contains little that is new. The proposals for settlement agreements and cap on unfair dismissal claims are already contained in the Enterprise and Regulatory Reform Bill published back in May, the Underhill review of Tribunal procedure contained a number of proposals designed to make it easier to dismiss weak cases and we have already had a call for evidence on the impact of TUPE. The one new proposal is the most sensible: improved guidance for small businesses is needed and can best achieve the desired result of encouraging new employment by reducing the uncertainty amongst small businesses around the impact of employment regulation.”

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