“No-fault” dismissals are now officially off the table, according to Business Secretary, Vince Cable. He has ended speculation on the issue while announcing new consultations on a range of employment law changes.
Some of these proposals will spark debate, but nothing like the firestorm that continuing with no-fault dismissals for smaller businesses would have provoked. The Government’s response to the consultation on this proposal confirms that it has now been dropped. Interestingly, this was largely because businesses were sceptical it would really limit the risk of claims and also concerned about the effect on recruitment and retention.
Nonetheless, Mr Cable has still proposed some significant changes. These include reducing the current cap on unfair dismissal awards and using “settlement agreements” to facilitate termination of employment. (Both these proposals are set out in a consultation document called Ending the Employment Relationship.) Also announced were the Government’s response to its call for evidence on TUPE and a consultation on streamlining the Employment Tribunal Rules.
The main purpose of the proposed reduction of the unfair dismissal cap is to give employees a more realistic expectation of the potential level of award for a successful claim. The average unfair dismissal award is less than £5,000 – way below the current maximum of £72,300.
Yet there’s a real concern this may simply lead to an increase in the types of claims for which compensation remains unlimited, such as discrimination and whistleblowing. With the Government aiming make the tribunal system speedier and more efficient, an increase in discrimination claims could prove a major own goal. Such litigation is often significantly more complicated, drawn out and costly than unfair dismissal.
Other Government proposals deal with how best to use settlement agreements to end relationships in a “fair and consensual” way. The consultation refers to making it easier for employers and employees to have open discussions with each other when the employment relationship is not working out. It suggests they could engage in “protected conversations” to try to find mutual agreeable terms, without the concern that what is said could be used against them in the event of a tribunal claim.
The consultation paper acknowledges there must be limits on what types of conversation are covered and that employees must be protected from discrimination or undue duress. Indeed, where there is any possibility of discrimination allegations being made, employers are likely to be wary about attempting to agree a dismissal in this way. The proposals also acknowledge that care must be taken to ensure protected conversations are not overused and don’t replace open, fruitful discussion about difficulties between employees and employers in the workplace.
It is not yet clear how the prospect of employers speaking to employees in this way about their dismissal will affect the obligations of trust and confidence at the heart of the employment relationship. There could be a risk that, for every employment relationship peaceably ended by a protected conversation, another may be irreparably damaged. Once this reform is implemented, a critical issue will be how tribunals deal with situations in which the breakdown of relations stems directly from a “protected” conversation.