Friday, September 14, 2012

Employment Law Reforms - A Solution in Search of a Problem?

The Department for Business Innovation and Skills has published, to much fanfare in the press and media, a consultation on changes to the law around the ending of the employment relationship.

When one actually gets down to reading the consultation however there is very little in it (if anything) which is really new or which is likely to make much difference in practice.

The Government's approach appears to be based upon a belief that employers are worried about taking staff on because of concern about their ability to terminate the employment if things do not work out. Other than anecdotal evidence there seems to be little basis for this belief and the end of the relationship is rather unlikely to be at the forefront of an employer's mind when recruiting (funding presumably being the major hindrance to expansion.)

Furthermore the suggestion appears to be that change is needed if this is employers' perception, whether or not it is based in fact. Away from the realms of urban myth, the law of Unfair Dismissal is actually quite favourable to employers and gives them a considerable degree of latitude in how they act. The qualifying period for a Claim is now 2 years in most cases and one would have thought that this would give an employer ample time to decide whether someone is up to the task before they acquire the right not to be dismissed without good reason.

The consultation confirms the Government's existing plan to make conversations about settlement inadmissible as evidence in Unfair Dismissal cases in certain circumstances. Bearing in mind that if there is already some underlying dispute between the employer and the employee such conversations would already be inadmissible in evidence under ordinary principles about "without prejudice" discussions it is unclear how this will take us any further forward. And it won't apply to, for example, discrimination claims anyway - so unless the employer is confident the only possible allegation would be of Unfair Dismissal they will not feel any more comfortable having this kind of conversation than they do now.

As an employment lawyer in practice I do not recognise a world where employers are reluctant to speak to employees "without prejudice."

It is proposed to simply compromise agreements although the requirement will still be for independent legal advice and although a template agreement and letters are suggested these are not going to be compulsory and as they will still have to be tailored to the individual cases it is unclear how this will be any different from the practice now.

The idea is to call them "Settlement Agreements" rather than "Compromise Agreements" on the basis that the use of the word "compromise" may be putting people off from using them because they do not want to be seen to be giving in! This seems highly unlikely and indeed in practice until the day when they take one to their Solicitor most employees have no idea what a "Compromise Agreement" actually is.  

Opinions are sought on whether to set out guideline tarrifs although cases are so variable it is hard to see this working and the fear that this will lead to the figures being used as a starting point from which to haggle upwards does seem to have some mileage to it.

The final consultation is on reducing the cap to the Compensatory Award from its current level of £72,300.00 , possibly to 12 months' salary. Since very few people get anywhere near either the cap or 12 months' salary this all seems rather academic and it is a power which could be exercised under the existing legislation anyway. The suggestion is that employers would be less worried about Tribunal claims if the cap were lower and that employees would be more realistic if there was a lower cap. Given that there is no cap on discrimination and whistleblowing claims, all a lower cap would be likely to achieve would be to lead to more of those claims, which are more difficult and costly for employers. There is also potential for injustice to high earners or to those whose careers are ended by their unfair dismissal. In no other area of law is an arbitrary cap applied to damages and it is unclear why it is necessary in unfair dismissal either.