26/10/2011

By Aidan McGuire, Solicitor, Blandy & Blandy LLP

On 3 October 2011, the Chancellor, George Osborne and Business Secretary, Vince Cable announced measures to reduce the number of what were described on the Department for Business, Innovation and Skills press release as ‘weak and vexatious claims’. The key measures announced included increasing the period of qualifying service for unfair dismissal protection from one to two years (the ‘qualifying period’) and introducing fees to bring claims in the employment tribunal.

The Union’s view
The Coalition Government’s Vince Cable has stated that he believes that these changes will ‘create the conditions which allow businesses, particularly SME’s to grow and expand’. However, the GMB Union, most noticeably, is not welcoming the changes and strongly disputes the government claim that any jobs will be created because of them. In a press release entitled ‘Tory Unfair Dismissal Claims Absurd’, they rely upon their research which shows that there is only one successful claim of unfair dismissal per 5,000 workers and even then the average award is only £4,900.

As a Union, they are understandably interested in the rights of their members, many of who stand to lose their right to bring an unfair dismissal claim. Its research therefore appears to paint a picture that unfair dismissal is a rare claim, being successfully brought each year by only 0.2% of the workforce and generally even then resulting in low value awards. However, the GMB’s research also states that only 10% of unfair dismissal claims brought were successful at a hearing. In fact, whilst over two thirds of all cases settle, more 20% are either struck out, dismissed prior to a hearing or are unsuccessful at a full hearing.


In practice
Of course, irrespective of the statistics available, the question is whether or not this change in the required period of service will actually reduce the number of claims brought to the employment tribunal and whether this reduction means that employers are likely to be more willing to increase the numbers they employ. In relation to the former, the statistics published by the Tribunal Service show that when the qualifying period was previously reduced from 2 years to 1 year in June 1999, the number of unfair dismissal claims increased. Between 1998/9 and 2000/1 there were 6,500 or nearly 20% more unfair dismissal claims issued.

Whilst these statistics appear to back up the government’s reasons for implementing changes, we cannot tell whether the increase in claims was solely, or mainly, due to the decrease in the qualifying period for unfair dismissal claims. Certainly, the number of claims brought to the employment tribunal increased from just over 91,000 in 1998/9 to nearly 130,500 in 2000/1, a 43% increase! In relation to the latter point whether the change will lead to an increase in employment it will prove impossible to accurately calculate how many, if any, new roles are created due to this change.

Currently, whilst we have been informed of the increase in the qualifying period, we do not have any details as to how the transition will be implemented. One significant question is whether the change will be retrospective, in that people with one year’s service, but less than two on 6 April 2012, will effectively lose their right to claim unfair dismissal.

Of course, if the change applies only to those employed on or after 6 April 2012, then the increase will only start to have a practical effect a year later – 6 April 2013.
Whilst it is hoped the change will decrease the number of unfair dismissal claims brought, there is speculation that instead, claimants will attempt to circumvent these requirements by bringing claims that do not rely upon qualifying periods – for example discrimination claims. It is also suggested that the two year period in itself may be discriminatory, due to more women than men having less than 2 years’ service. In fact this was likely to have been a key reason that the qualifying period was reduced to 1 year in 1999 (R v Secretary of State for Employment ex parte Seymour-Smith).

The change in the unfair dismissal qualifying period must also be viewed as one of many changes being made to employment law as a whole. Whilst the increase in the qualifying period must be seen as beneficial to employers, other changes such as the introduction of the Agency Workers Regulations 2010, on 1 October 2011, protect workers from abuse by agencies and hirers. When viewed together it appears that employing temporary workers is indirectly being made less attractive (due to the need to pay them the same as comparable employees) whilst the risks of employing workers directly are being reduced.

Fees
The Coalition also proposes that when a claim is brought, whether in relation to unfair dismissal or otherwise, the claimant will be required to pay a fee. It is speculated that the fee for issuing proceedings and having a hearing listed may be as much as £1,250. Whilst there is much speculation as to the amounts that will be charged and whether those with higher value claims will be required to pay proportionately more, all that appears certain at the moment is that those on lower incomes will not be precluded from bringing claims if they cannot afford the fee. Whilst the increase in the qualifying period is due to come into force on 6 April 2012, the introduction of fees is to apparently to be delayed until the following year, April 2013.

The introduction of fees may be far more beneficial for business as it will hopefully prevent disgruntled ex-employees from bringing spurious claims in order to either seek ‘easy money’ in settlement or to punish their employer for dismissing them (by causing ongoing disruption). Of course, whilst business may welcome fees, there is a risk that lower paid, but poorly treated, employees, will be unable to justify the charge when balanced with the level of award they may receive.

Conclusion
These changes are currently devoid of detail. Only once we understand how they will be applied will we be able to estimate with any accuracy their likely effects. However, in the current economic climate, businesses will undoubtedly be grateful for any help that can be given to them, to minimise diverting attention from business to defending employment litigation claims.