Red tape or red faces? – Proposed changes to employment tribunals

Government proposals to raise the qualifying period of employment for unfair dismissal claims from one year to two may be bad news for employers, according to David Jepps.

Employment tribunals – formerly known as industrial tribunals- have been in existence for nearly fifty years. They hear a multitude of claims concerning employment-related rights. The tribunal consists of three members: the employment judge (a qualified and experienced lawyer); and two "lay members" – one with an employer’s perspective (such as a senior human resources professional) and the other is a representative of employee interests (such as a union official).

At present, a disgruntled employee can visit the HM Courts & Tribunals Service website and start a claim at no cost by filling out an online form. The employer then has 28 days to file a response, failing which it cannot defend itself.

In nearly all employment tribunal cases, costs do not follow the event. That means that even if the employer wins the case, it still has to pay its own legal and other expenses.

The government has launched a "Red Tape Challenge" with the aim of reforming employment law to assist business and aid economic recovery. Employment tribunals are currently inundated and by way of illustration, one case which started last Spring will not go to trial until this Summer.

Most cases at employment tribunals concern unfair dismissal. (See article "Dismissals – It’s not what you do but the way that you do it"). At present the general rule is that employees need to have been employed for a year to claim unfair dismissal. The government proposes to raise that qualifying period of employment to two years from April 2012.

There is some division within the coalition government relating to employment rights, but the increase to a two-year qualifying period will take place. The Chancellor promised the change both to the Conservative Party conference and in his pre-budget statement.

Also, no new Act of Parliament is necessary to make the change – the qualifying period of service has gone up and down in the past in accordance with ministerial powers as governments have changed. Regulations will soon be put before Parliament and, although there will be a debate, the changes will almost certainly be passed.

What has been uncertain is how the change will impact. There were three possibilities:

1. Will employees that currently have rights lose them in April?
2. If not, will the new law take into account time employees have already worked?
3. Will the new law only apply to new starters?

If option A. was chosen then there would be political fireworks. However, if option B. or C. was chosen there would need to be different arrangements for different employees and as such more work for tribunals and lawyers.

The government has recently confirmed that it has chosen option C. The new two-year qualifying period will only apply to those employees who start with a new employer on or after 6 April 2012. If an employee has six months (or indeed eleven months) service at that date the one year threshold will still apply.

There remains one constant factor I have found in twenty years of employment law practice. The real reason employees go to tribunal is not to do with their legal rights but because they are upset.

If employees cannot claim for unfair dismissal, then it is likely that there will be an increase in discrimination cases as such claims do not need any qualifying period of employment. That was a pattern experienced after 1985 when the qualifying period was last raised to two years.

Discrimination cases often involve more paperwork, additional and longer hearings and sometimes are brought against individuals as well as the employer. As it usually costs employers more to win and clear their name than to settle and avoid publicity, all this adds up to a lot more time and cost. If discrimination cases succeed, then unlike in unfair dismissal cases there are no limits on compensation.

Prevention is always better than cure. It is pragmatic to take specialist legal advice at the earliest sign of an employment dispute and to rely on expert experience if a cure is needed.

The government is also thinking about new measures encouraging mediation, early settlement, quicker tribunal processes and even introducing fees to bring claims. Such proposals are embryonic, politically sensitive and some of them have already been attempted without success in the past. You will no doubt hear more about these further proposals over the coming year.

For now, the cutting of red tape may well produce red faces as there will almost certainly be higher cost both to the taxpayer and employers, at least in the short term.

The Keystone Law employment team is highly experienced in these matters and will be happy to assist you in relation to dismissals or indeed any other aspects of employment law.