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Employment law reforms – what's on the cards?



United Kingdom

Employment law reforms – what's on the cards?

On 23 November 2011, Business Secretary Vince Cable announced the Government's radical proposals to reform employment law.

The proposals, which the Government expects to deliver £40million a year in benefits to employers, will impact on most areas of employment law. The main proposals are as follows:

  • unfair dismissal qualifying period to increase from one to two years;
  • compulsory lodging of all claims through the Advisory, Conciliation and Arbitration Service (ACAS) for conciliation before they can progress to a tribunal;
  • the introduction of "compensated no fault dismissals" for micro-firms and a consultation on the introduction of "protected conversations" (click here for Angus' Ackroyd's article on this proposal);
  • financial penalties will be introduced for employers who breach employment rights;
  • the Government will consider whether it can introduce a “rapid resolution” scheme, to provide quicker, cheaper, determinations in low value, straightforward claims;
  • a call for evidence on reducing the 90 day minimum consultation  period for collective redundancies, to 60, 45 or even 30 days; and
  • a call for evidence on proposals to simplify TUPE.

Impact of the reforms

One of the most significant changes for employers is the imminent extension of the qualifying period for unfair dismissal protection from one to two years. The stated aim of the change, due to take effect on 6 April 2012, is to encourage employers to take on new employees. There were 47,900 unfair dismissal claims in the UK in 2010-11.  The Government estimates that this number will fall by approximately 2,000 as a result of the extension. 

Increasing the qualifying period is one way of creating a “flexible workforce.” However, it may also exclude many employees from the employment protection offered by the unfair dismissal laws. Many of those excluded will be the young, women returning to work following time off to have children and ethnic minority and disabled employees. Interestingly, the Government acknowledges that "there is a degree of disparity of impact from extending the qualifying period" but does not consider that an extension of the unfair dismissal qualifying period would cause a considerable disparity of impact on any particular group. Critics have predicted that the change will have the effect of encouraging far more complicated and costly claims for discrimination, for which there is no qualifying period. The Government has stated that it is unconvinced by such arguments.  

The Government also hopes to entrench the principle that the employment tribunal is the "option of last resort" by requiring all claims to go through ACAS before reaching tribunal. However, it will be interesting to see how an already stretched ACAS deals with the increased workload that this move will bring and it is anticipated that ACAS will need a substantial injection of funds and resources to cope with the influx.

Reaction to the suggestion that the 90 day collective consultation redundancy period may be reduced has been mixed. Whilst the business lobbies appear to be in favour of the move on the basis that a consultation period as long as 90 days is not needed, the trade unions are less keen with Roger Jeary of Unite branding it a "grave disservice" to employers and employees.

There is another consultation paper on its way on introducing fees for employees who wish to bring a tribunal claim. There will be two options to consider. The first option proposes a system that involves payment of an initial fee to lodge a claim and a second fee to take the claim to a hearing. The second option proposes introducing a £30,000 threshold, so those seeking an award for more than £30,000 will pay more.

Government Minister Ed Davey had previously indicated that fees will be introduced on a sliding scale and that people on low incomes may have the fee waived or reduced. Introducing fees for bringing employment tribunal cases has been heralded as the solution to the problem of vexatious claimants. However, the introduction of fees will undoubtedly also deter genuine claimants and may therefore unfairly deny such claimants access to justice.

Cable has said that through the reforms the Government is trying to balance employment protection for workers, and helping "small companies feel confident enough to take on staff." However, commenting on the reforms, TUC's General Secretary, Brendan Barber has said that "research from the OECD shows that there is no link between regulation and economic output – German employees have much more protection at work and their economy is the strongest in Europe." It remains to be seen whether the intended reforms will give employers more confidence to hire or instead culminate in the creation of a "hire and fire" culture.

Faye Hyland, Trainee Solicitor in Fieldfisher’s Employment and Pensions practice.

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