Andrew Brown, associate with Anderson Strathern LLP
In October last year a summary of a report to the Government by venture capitalist and Conservative Party donor, Adrian Beecroft, was leaked.
The report recommended the introduction of “no fault dismissals”, whereby an employer could dismiss an employee and avoid a claim, if it paid the employee their notice pay and an amount equivalent to statutory redundancy pay.
With notice entitlement typically a week per full year of service, capped at 12 weeks’ pay after 12 years and with the statutory redundancy payment linked to age and length of service and capped at £12,900 after 20 years, this is not a generous proposal.
The summary acknowledged that some employees may simply be dismissed because their employer does not like them, but suggests that “this is sad [but] …a price worth paying”.
The Government has recently published the whole report in a bid to prevent further speculation.
The report contains a raft of other recommendations including allowing “micro-businesses” (not more than 10 employees) to "opt out" of a number of employment laws including flexible working and pensions auto-enrolment, reducing collective redundancy consultation from 90 to 30 days, and capping compensation for loss of earnings in discrimination cases. If the Government’s aim in publishing the report was to quell public concern, it has not worked.
One commentator on a social media site for HR professionals had some strong words to say on the report:
“He seems to have little or no understanding …of the impact a severely de-stabilised work-force would have on the economy.
It's merely a list of the laws venture capitalists would like to do away with to help themselves. He provides not one reference for his outlandish claims (the report wouldn't pass GCSE level 'Critical Thinking')...,”
Many aspects of the report are ripe for criticism and quite concerning. However, despite some sensationalist reporting, it is not the case that the Government necessarily backs all of the report’s recommendations.
Indeed the Government recognises that the report has misunderstood certain aspects of current legislation and that capping discrimination claims would fall foul of EU legislation. The Government does not support the recommendation that micro-businesses be allowed to opt out of certain employment laws and has issued a Call for Evidence on the impact of various of the remaining recommendations.
The Department for Business, Innovation & Skills (BIS) has announced a list of those recommendations it is taking forward in some way or another. Among the most controversial recommendations being taken forward are:
** No fault dismissals for micro-businesses. Senior Liberal Democrats, including Dr Vince Cable, have voiced objections to the proposal. BIS has published a research paper on how similar provisions work in Australia, Germany and Spain. Comments on the matter can be made to BIS up to 8 June
** Monitor the impact of the removal of the Default Retirement Age (DRA).
** Removal of third party harassment provisions in the Equality Act 2010. These provisions may render an employer liable for a third party harassing their employee, if they are aware of that employee having been harassed on two previous occasions (whether or not by the same perpetrator). Employers have a defence if they can show that they took “reasonable steps” to prevent this occurring, hence the proliferation of warning signs on public transport.
It appears doubtful that “no fault dismissals” will lead to a mass of new jobs being created or that if they are, they will significantly outweigh the number of employees dismissed as a consequence of the new provision.
It is perhaps easier to see how the removal of the DRA might have impacted on business and the economy by potentially: “blocking” the top jobs; demotivating younger staff; and contributing to youth unemployment. However, if a DRA is to be reintroduced it is not likely to be until 2016 and it would have to be capable of satisfying a high test for justification in order to comply with EU legislation.
The removal of third party harassment provisions might not be as severe as it first appears. The employer would still be obliged to provide a safe working environment and could not simply turn a blind eye to harassment of their staff.
Nonetheless, the removal will be welcomed by those employers who feel powerless to prevent harassment of their staff by customers and to whom it is not always clear what “reasonable steps” they must take. However, most employers are unlikely to be aware of the current provisions regarding third party harassment. It is difficult to see how their removal would have any appreciable impact upon the economy.
Meanwhile, The Enterprise and Regulatory Reform Bill, which contains provisions designed to reduce the number of cases reaching the Employment Tribunal and to speed up the process for those that get there, has been laid before Parliament. Rightly or wrongly, the Government’s overhaul of employment law appears set to continue, with the populist and questionable claim that it is driven by a desire to boost the economy.
Andrew Brown is an Associate in Anderson Strathern LLP’s Employment and Pensions Unit who acts for employers and employees.