Compulsory No Fault Dismissal

The announcement in the Daily Telegraph on 26 October that the government is considering a fundamental change to the law on unfair dismissal has been greeted with an appalled and sustained silence by most legal commentators.  For those used to the decades-long flow of new rights and regulations for workers, the suggestion is a social gaffe of the first order.  Eyes are lowered, feet are shuffled, and nothing is said.

The leaked report by venture capitalist, Adrian Beecroft, warns of the cost to business of underperforming workers and points out the cost and complexity of sacking them.  His proposal is a “Compulsory, No Fault Dismissal” system, whereby employees are simply called to a meeting, given the chance to argue their case, and the right to suggest (but not demand) that they be given time to improve or transferred to a less demanding job at a lower wage.  If this self-abasement does not appease the management, the employee can simply be given notice and the same payment as if made redundant.

For most employees, this is a fairly measly amount.  The formula is based on age, but for those between 22 and 41, it is one week per year’s service, capped at £400, so a typical employee with 3 years’ service would walk away with £1,200 - not the sort of figure to put a spring in your step.

Until now, the government’s proposals in the field of employment law reform have been relatively modest, but desperate times call for desperate measures.  Growth is now the priority at all costs, and the law of unfair dismissal presents one of the only methods available for drastic action, for the simple reason that it is not of EU origin.  These rules, laid down in the early 1970s, are the bedrock on which 40 years of mainly euro-led regulation has been erected; the whole field of discrimination law, maternity and paternity benefits, TUPE, the recent agency workers regulations and much else – all from Brussels and all inviolable.

It is true to say that dismissals for poor performance are time-consuming, complex and difficult to justify at a Tribunal.  The typical process will involve a series of monthly meetings, setting out as objectively as possible where the employee is going wrong.  It will involve offers of further training, or lightening the load for a while, accompanied by a series of escalating warnings; verbal, written, final written warnings and eventually dismissal, but only when efforts to improve had been shown to be unavailing.  All this takes 3 to 6 months, longer still with longer-serving staff, and is a highly personal and unpleasant business for all concerned.  The under-performing employee is being paid in full during this period, no one else can be recruited, and faced with this long drawn-out process many employers simply avoid it and put up with things.  They worry, with some justice, that a word out of place will lead to grievances, stress-related absence and a claim of constructive dismissal.  Redundancies or dismissals for misconduct, by comparison, are much simpler and are generally over in a few weeks.

If some rebalancing is called for, the present proposals seem to go from one extreme to the other, and to herald a cultural transformation from a European to a US style system, with little or no job security.  Why bother with a redundancy selection exercise, for example?  If there is one member of the team who looks like the weakest link, just call them in to a meeting and let them go.  No point bothering the rest of the team.  And if someone’s attitude this week is a bit stroppy, why keep them on at all?

Is this to be the new face of employment law?  The practical implications are certainly hard to fathom.  If a new system it is to be aimed at poor performers, it is unclear why it is called a “no fault” system.  Presumably the employee would be able to challenge the dismissal on the grounds that they were doing fine, thank you very much.  At present, poor performance generally has to be fairly transparent to justify dismissal, but if the bar is to be lowered, how low will it go?  And how will the employer prove that the dismissal was justified if they have shot from the hip, as the system seems to allow?

It may be that in the corridors of power they too are shuffling their feet and saying little, given the implications of this plan.  But if not, nothing comparable will have occurred in employment law in a generation.

Contact Eoin Fowell on 01752 292350 or James Twine on 01752 292351 for all employment law advice.

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