John ReadOn the evening of 6 March, George Osborne announced a call for evidence (not a full consultation) on “compensated no-fault dismissals” for small businesses.
Anya Palmer usefully collated some reaction – including from Anna Birtwhistle (CM Murray LLP) and Flip Chart Fairytales (both of whom I agree with) to the original Beercroft proposals in The Lawyer, but I thought I’d add some comments.
I’m going to focus on Osborne’s comment: “But what about your right to start a business and not be sued out of existence?”.
Unless I’m missing something, no employer has a right not to face tribunal claims from aggrieved employees who feel that they have been treated unlawfully. When it comes to unfair dismissal, employers have only to act reasonably in the circumstances to dismiss an employee fairly. I don’t think that most people would argue that that’s too much to ask. I appreciate that small employers, perhaps without dedicated HR functions, might be panicked about employment law generally and unfair dismissal in particular. But there’s help available: ACAS produces a wealth of guidance on dismissing employees, and if you follow that (and – sorry, shameless plug – subscribe to XpertHR!) then you won’t go far wrong.
Of course, employers (small or otherwise) can be put to great expense and hassle by vexatious claimants, or where the employee simply doesn’t have a very good case. The former situation will no doubt be helped by (as Osborne noted) the Government’s decision to introduce fees for bringing a tribunal claim, and the latter by the standard tribunal procedure, which allows claims to be thrown out where they have little or no prospect of success. If claims have a reasonable prospect of success, then there’s no reason why the employee shouldn’t be able to bring the claim.
So, bearing all that in mind – particularly that reasonable employers can dismiss employees already with little or no risk of being “sued out of existence” – who is Osborne trying to protect? Unreasonable employers? Osborne’s statement almost implies that employers can be sued out of existence regardless of how they treat their employees.
I agree that these proposals will probably save employers time and expense when dismissing employees, but I doubt that they will increase employment, and they strike at the heart of the most basic protection for employees, protection that is there for a reason.
The other point is the call for evidence. As Darren Newman commented earlier on twitter, exactly what evidence will this produce? I am entirely sure that small businesses and various organisations, such as the CBI, will be in favour of the proposals – and, looking at it from their perspective, that’s completely understandable. But will that evidence actually tell us anything other than that those stakeholders agree with it?
Osborne suggests that people submit evidence if they think the proposal will increase employment. Do employers really hold off on employing people they need for their businesses just because of the potential consequences if they don’t act reasonably in dismissing them? I find that a very strange notion indeed.
Employers genuinely don’t need to worry about unfair dismissal, provided they act fairly. Discrimination law is a much more complicated area, and there will certainly be no exemptions for small employers from those claims, which may well increase if Osborne’s proposals are implemented.
For more information from XpertHR on this issue, see:
- Government announces call for evidence on “compensated no-fault dismissals The Chancellor George Osborne has announced a call for evidence on “compensated no-fault dismissals” for small businesses. The Government has yet to set out the details of its proposals, but it is expected that they would allow employers with 10 or fewer employees to dismiss an employee with notice pay without him or her being able to bring an unfair dismissal claim.
- Osborne launches call for evidence on no-fault dismissals Personnel Today reports on George Osborne’s proposals
- Podcast: “Radical” employment law reform; and employee engagement On this XpertHR Weekly podcast, employment law expert and consultant editor Darren Newman shares his thoughts on various proposals, including no-fault dismissals for micro-firms.
- Compensated no-fault dismissals: Osborne calls for evidence Michael Carty gathers reaction to George Osborne’s speech on the XpertHR Employment Intelligence blog.
John Read is entirely wrong when he says that vexatious claims “will not get very far”. As most employers know only too well the majority of employee claims for unfair dismissal are entirely without foundation. However, the majority of solicitors will advise employers to settle early and out of court rather than risk being involved in a lengthy wrangle and run the risk of ending up in a tribunal. This is generally bad advice because employees know only too well that if they go to a solicitor then they will have a good chance of receiving some kind of pay off over and above their notice payment.
I work for the Federation of European Employers (FedEE) and we have estimated that in the UK alone last year employers paid out over £2billion in out of court settlements for cases where they were not at fault. A high proportion of these employers had less than 25 employees and in almost all cases the payments were made on the advice of a solicitor.
George Osborne’s proposal may not entirely remove this problem because a system of fixed comensation payments would be seen as a norm and thus every dismissed employee would want to challenge their dismissal. What if an employer refused to make the fixed compensation payment because it was clearly unjustified – or the employee refused to accept the payment (as they can do in Germany) In such a case presumbly a court action would follow. Moreover, there is a trend towards dismissed employees who have not yet worked long enough to claim unfair dismissal to submit claims for harassment or discrimination. The current proposal would do nothing to allay such a trend and employers would remain in the hands of solicitors intent on maximising their fees for least effort.
Thanks for your comment, Robin, and for another perspective. I sense that employment lawyers aren’t your favourite people!
I would agree that employment lawyers should encourage employers to settle early where appropriate, but it is an unfounded generalisation to imply that the majority of lawyers will always do this, regardless of the merits of the claim. It can be very helpful to offer a “nuisance payment” to try to get rid of a claim at an early stage, but that’s a commercial decision for the employer to make, based on advice. The fact remains that if a claim has little or no chance of success, the employer should be able to get it struck out under the existing rules. Now, that may end up costing more than it would to settle the claim with the employee, but that’s a risk the employer will need to consider when deciding what to do, and everything will depend on the circumstances. I’m sure there are some solicitors out there who don’t always give good advice, but that’s not a stick with which to beat all of them.
I don’t think that if an employee goes to a solicitor they have a good chance of getting a pay off. Sometimes they will, sometimes they won’t – again, everything will depend on the circumstances. The employer will weigh up the employee’s potential claim and other factors, including whether or not it wants to be seen to be settling as matter of course, which may encourage other would-be claimants.
It also seems a generalisation to say that the majority of unfair dismissals claims are without foundation – what do you mean by this, and where is the evidence? Certainly the majority of unfair dismissal claims aren’t successful (8% of those disposed of succeed), going by the official statistics, but that doesn’t mean that the rest have no merit at all. A large number are withdrawn, but not many are rejected out of hand by the tribunals.
Genuine question: in your survey of how much employers paid out for court settlements, who decided whether or not the employer was at fault? The employers who were surveyed?
We’re in agreement, however, that no compensated no-fault dismissals would not really help the situation, for a variety of reasons. I also agree that discrimination claims would probably increase, as aggrieved employees seek other ways for redress.