Legislation should not be blamed for restricting growth

The Government is getting itself into an incredible lather over employment law. Senior employment lawyer Richard Fox looks at recent developments in the coalition’s aim of reducing red tape and asks if the latest employment law proposals could damage the very businesses they are intended to help.

2011 started with the perfectly reasonable paper, Resolving Workplace Disputes. This put forward a number of coherent proposals to head off claims that otherwise would have gone to employment tribunal, and to make the management of cases that do get into the tribunal system more efficient.

However, since the end of the consultation exercise on those proposals, to the disappointment of many who had engaged so willingly and comprehensively in the process, we had heard nothing in relation to the conclusions until a few weeks ago, when there was a sudden burst of activity.

Richard Fox

Richard Fox, head of employment, Kingsley Napley.

Red Tape Challenge

As part of the “Red Tape Challenge”, we were told that there was a special opportunity to communicate directly with the Government to flush out those employment Regulations that were superfluous and a waste of employers’ time. We were also treated to a pantomime over the proposed extension of the qualifying period for unfair dismissal.

The latest development was the leaking to the Daily Telegraph of the Beecroft report, with its headline proposal to abolish the right to claim unfair dismissal and replace it with a new system of compensated no-fault dismissal.

Employment lawyers might be forgiven for wondering what actually is going on? It seems to me that the Government is creating some of the “problem” itself, and then having done so, suggesting a solution.

In order to show that it can do something to put the much-needed growth back into the economy, it has encouraged the narrative that employers feel “strangled” by red tape, especially in the employment context, and that they would start to recruit once more were it removed.

Government approach is potentially damaging

Unfortunately, the Government has produced absolutely no evidence that that is the case. Further, I actually believe this to be wrong and that the Government’s approach is potentially damaging not just to employees and their rights, but also, and crucially, the small and medium-sized businesses that they are setting out to help.

Why is this the case?

1. Employers generally decide to recruit when they have the business need to do so. In few cases will they be deterred by the potential risk of a tribunal claim. The truth is that in the current economic climate, if an employer can avoid the cost of new labour, it will. Conversely, if it needs staff to grow, it will take them on.

2. The idea that employers are not recruiting because of the perception of red tape only exists, in large part, because the Government constantly reinforces that specific message.

3. The Government may be looking to limit the employee’s ability to claim unfair dismissal but, unfortunately for employers, that does not mean an employee will simply shrug his or her shoulders and walk away. We know this is the case because City employees who can bring unfair dismissal claims, but who find the potential payout too low because of the statutory cap, look to bring alternative claims which are not monetarily limited, such as discrimination or whistleblowing. And it is those claims which are much more burdensome for employers than “ordinary” unfair dismissal claims.

4. In fact, most reasonable employers believe that employees should have rights, and rights always carry a financial cost. I have no doubt that the general public also believes that it is fair to have the ability to claim these rights and defend oneself.

For all these reasons, the Government should resist the temptation to make short-term political capital out of making employment law a national scapegoat for public frustration at the lack of economic growth. Instead, it should look carefully at our tribunal system and the legislation that surrounds it, and bring in properly considered, holistic reform so as to improve efficiency and value. Generating haphazard headlines for PR gain is not helpful.

“Protected conversations” an encouraging sign

There is one ray of light, however. The Deputy Prime Minister’s comments on “protected conversations” last week are an encouraging sign. I have always believed that if the Government is serious about reducing the number of claims going through employment tribunals, it should allow employers and employees to sit down and have adult conversations about their future together, without either side feeling exposed to the risk that anything revealed in those discussions may subsequently be used against them in evidence.

Let us hope we will shortly see the Government’s response to the Resolving Workplace Disputes consultation so that we can put an end to this potpourri of selective revelation and inaugurate a proper, considered package of reform for this crucially important area of the law.

Richard Fox is head of employment for the law firm Kingsley Napley

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