Nikki Duncan
Posted on 3 Apr 2014

Easier to Hire and Fire?

For the last couple of years the Coalition have been introducing a range of measures designed to allay employer fear about being faced with Tribunal claims.  This drive is based on concern that such fear was impeding business growth, with employers too cautious to recruit, and/or to address capability issues in the work force.

The first major change was to increase the unfair dismissal qualifying period from one to two years from April 2012, ostensibly giving businesses longer to decide if employers are right for the job.  More recently that has been coupled with a one year's pay cap on unfair dismissal compensation, with scope to further reduce that cap if need be, to deter UD claims.

Making unfair dismissal claims less attractive, particularly for high earners, does however encourage discrimination and whistle blowing claims, where there is no qualifying period or compensation cap.  A significant proportion of ET claims therefore include one or more forms of unlawful discrimination, often as an additional negotiating tactic, to encourage an out of court settlement. 

Reputational risks around discrimination and whistle blowing claims can also encourage early settlement, although often the stakes are high. With whistle blowing there is the added concern about how any significant buy off payment could be interpreted.

Along with these changes the Government has introduced 'Settlement Agreements', essentially as a potential tool to cut across lengthy performance management or capability processes.  However, again these do not protect against any discrimination angle, and contain many other potential pitfalls for the unwary employer, not least of finding that they cannot reach a sensible settlement, and have a disaffected employee still to deal with under the normal processes. 

A more effective deterrent to claims has undoubtedly been the introduction, last July, of Employment Tribunal fees.  Following a significant hike in the number of claims lodged just before the fee regime was introduced, there is now a marked decrease in new claims.  It is too early to tell exactly how this will level out, but current statistics suggest the fee regime is a deterrent.  However, somewhat ironically, it is also a disincentive to early settlement, since many employers will now wait to see whether the employee will pay the ET fee, before being willing to enter into settlement negotiations.

The "wait & see" approach may also impact on the success rate of the ACAS Early Conciliation (EC) Scheme, to be introduced this April.  This Scheme will require all potential ET Claimants first to liaise with ACAS, and give ACAS an opportunity to explore the scope for a conciliated settlement, before an ET claim can be lodged.  

Time will tell how successful the EC Scheme will be, but in the meantime there is some concern that the 'pause' in time limits for ET claims may lead to uncertainty and satellite litigation. 

Employers certainly need to be live to the new EC process, not least since they may be called by ACAS any time from 6 April 2014, and that may be the first intimation they have of a potential claim.  Employers will therefore wish to try to ensure that such calls are managed carefully internally, either by the HR Team, or other designated person trained to deal with this new scheme.  That person will need to be particularly live to the limitations of conciliation, in that it will not preclude any additional heads of claim which the employee may want to bring subsequently.  To achieve full and final settlement, a Settlement Agreement would be required.

In summary, much is changing, and the number of claims will be reducing, but those ET cases that remain are likely to be both more complex, and potentially more costly, not only financially but in terms of reputational risks for the business. Indeed, the increasing use of websites, and social media, by disaffected former employees airing their grievances publically needs wise handling. Such public criticisms can potentially be more dangerous and costly than any ET claim.  It remains to be seen whether the limitations on legal redress outlined above, will further fuel this trend, as employees seek other forms of redress. If so, employers will increasingly be seeking help from employment lawyers who also cover defamation claims!

If you would like more information in relation to any of the issues discussed in this article, please contact Nikki Duncan, a Partner in the Employment Team, at nikki.duncan@michelmores.com.