Vince Cable’s so-called tribunal system “shake up” has sparked disagreement among lawyers as to how significant the impact on employers is likely to be.
The Business Secretary confirmed today that the controversial ‘no fault dismissal’ proposals made in a Downing Street-commissioned report by venture capitalist, Adrian Beecroft, were being dropped due to a lack of support among the business community. According to Kate Hodgkiss, employment partner at DLA Piper, only 53 of the 163 businesses who responded to a consultation on the matter were in favour, with the majority believing that the proposals would act as a disincentive to hiring, create a two-tier workforce and make micro-businesses uncompetitive. But Cable also published two new consultation papers in what he described as an attempt to “strike a balance” between helping employers and protecting employees. While most of the proposals weren’t new, the most significant suggested cutting the maximum compensation that could be awarded to employees for being unfairly dismissed. The current ceiling is £72,300, but the government is seeking views on whether to cap awards at 12 month’s pay or reduce them to under £26,000. According to Hodgkiss, the move would simply result in unfair dismissal accusations being swapped with potential discrimination claims. “This is likely to have a very significant impact, with employees becoming more likely to bring complex and expensive discrimination claims as a result – a potential nightmare for companies keen to manage their reputations,” she warned. Such change would also see senior executives becoming keener to negotiate “far more generous contractual packages” in order to ensure that they received adequate compensation if their contracts were terminated, Hodgkiss added. But Jim Lister, head of employment at law firm, Pannone, disagreed. He attested that, because the number of tribunal claims that resulted in compensation of more than 12 month’s salary were currently “insignificant”, the proposed cap would “make virtually no difference”. The median unfair dismissal award was generally less than £5,000, which meant that very few claims would be affected by the proposals, he added. Moreover, Lister said: “Most big money claims relate to unlawful discrimination, but Mr Cable does not have power under European law to restrict compensation in relation to those claims.”