Unfair dismissal claims made harder

The UK government announced in October 2011 that, from April 2012, it will be harder for employees to make claims for unfair dismissal. The qualifying period of employment required before an employee can claim unfair dismissal in an employment tribunal will double, from one to two years. The government has also introduced a fee for bringing a case to a tribunal. The changes are intended to make it less risky for businesses to hire staff, but unions are highly critical.

Current rules

Employees in the United Kingdom who believe they have been unfairly dismissed by their employer can bring a case in an employment tribunal. If the tribunal finds in the employee’s favour, it can order the employer to reinstate or re-engage the employee or, more commonly, pay compensation.

As a general rule, employees must have at least one year’s continuous employment with the employer when their employment is terminated to be able to bring an unfair dismissal case in an employment tribunal. However, no qualifying period of employment is required for claims of unfair dismissal on certain grounds. These include unlawful discrimination, for example on grounds of sex, race, disability, religion or belief, sexual orientation or age, and the exercising of statutory employment rights such as the right to maternity or parental leave or trade union membership.

As well as dealing with unfair dismissals, employment tribunals adjudicate other individual employment law disputes between employees and employers (UK0403101T). Claimants pay nothing to bring a case in a tribunal.

Increased qualifying period and fees announced

In January 2011, the Conservative-Liberal Democrat government launched a consultation on workplace dispute resolution (UK1102019I), which included proposals for increasing the qualifying period of employment required to claim unfair dismissal, and charging fees to claimants using tribunals. On 3 October, speaking at the Conservative Party conference, the Chancellor of the Exchequer George Osborne announced that the government would implement these proposals. He said:

We respect the right of those who have spent their whole lives building a small business not to see that achievement destroyed by a vexatious appeal to an employment tribunal. So we’re now going to make it much less risky for businesses to hire people. We will double to two years the amount of time you can employ someone before the risk of an unfair dismissal claim. And I can tell you today we are going to introduce for the first time ever a fee for taking a case to a tribunal that litigants only get back if they win. We’re ending the one-way bet against small business.

The Department for Business, Innovation and Skills (BIS) confirmed that the normal qualification period of employment for entitlement to claim unfair dismissal will be extended from one to two years, from 6 April 2012.

It appears that there will be no change to the list of specific circumstances in which, under the current system, no qualifying employment period is required before an employee can make a claim of unfair dismissal.

Details of the new fee-charging system for using tribunals, which will come into effect in 2013, have not been finalised but it has been suggested that employees will have to pay £250 (€285 as of 31 October 2011) for lodging a case and £1,000 (€1,140) if the case reaches a hearing, which would be refunded only if the tribunal ruled in their favour.

Vince Cable, the Secretary of State for Business, said the reason for increasing the qualifying period is that ‘businesses tell us that unfair dismissal rules are a major barrier to taking on more people’. The BIS said it expected the changes to dismissal and tribunal rules would together cut unfair dismissal claims by 2,000 a year and save businesses £6 million (€6.83 million) a year.

Social partner reaction

The Confederation of British Industry (CBI) employers’ organisation welcomed the government’s announcement as ‘a very positive step’. It argued that small firms are ‘sometimes put off taking on an extra employee because of the fear of ending up in front of an employment tribunal’ and that ‘doubling the period for unfair dismissal rights and introducing a tribunal fee to prevent vexatious claims will give firms more confidence to hire’.

However trade unions were highly critical. Brendan Barber, General Secretary of the Trades Union Congress (TUC), described the changes as ‘providing help for bad bosses to mistreat and sack staff on the cheap’. Len McCluskey, General Secretary of Unite, the UK’s largest union, said that the government ‘wants to make it easier to hire and fire at will while making it harder for workers to challenge bad bosses’.

John Philpott, Chief Economic Adviser at the Chartered Institute of Personnel and Development (CIPD), which represents human resources professionals, argued that increasing the qualifying period:

… runs the risk of reinforcing a hire and fire culture in UK workplaces which would be detrimental to fostering a culture of genuine engagement and trust between employers and their staff and potentially harmful to the long-run performance of the UK economy.

Mark Carley, IRRU/SPIRE Associates