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Budget Britain: Save money, banish employee rights...

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21st Mar 2011
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Balancing the rights and responsibilities of employers and employees is a trite phrase in the HR world. Recent political change coupled with the challenging economic backdrop has shifted this balance, generally, in the favour of employers. Whether the latest government proposals go too far in their fight against the “enemies of enterprise”, depends on your view point.

The “small enterprise exemption initiative” is the latest in a raft of proposals and consultations aimed at tackling perceived dissatisfaction in the business world at the inflexible ‘pro-employee’ Labour legacy. The initiative, which is expected to be announced in [this/next] week’s budget, could result in firms with 10 employees or less being exempted from regulations such as those governing maternity and paternity leave and the right to request to work flexibly, a suggestion that has already been welcomed by many business groups.

This latest ‘pro growth’ proposal from the government may indeed strip away what Prime Minister Cameron believes are barriers to growth, but how these proposals will work in reality is far from clear and it is even questionable whether the more radical proposals, such as removing maternity and paternity rights for employees in small firms, would be lawful.

Government cannot simply deprive some employees of their employment rights, many of which derive from EU law. We know the government promised to halt the ‘gold plating’ of EU legislation in its manifesto, but abolishing employees rights altogether would be a clear breach of EU law- the government might be able to reduce some parts of the entitlement to comply with EU minimum standards but it could not get rid of it altogether.

The UK is no stranger to legal challenge when it has stepped out of line with the EU; the Equal Opportunities Commission as well as well as charities such as Age Concern have in the past mounted, in judicial review proceedings, a number of successful and costly challenges to various strands of equal opportunities laws in the UK.

It has been suggested that firms employing 10 or fewer employees would have the right to negotiate deals with their staff in relation to, for example, the length of maternity leave they might take or the level of pay during such leave. How these deals will be ‘negotiated’ is legally problematic and may result in disputes relating to the fairness of such negotiations- what if a male employee negotiated a more favourable package or a part time employee got a less attractive deal?

Would a less experienced younger employee be pressurised into accepting a bad deal and would employees only be given a job if they ‘contract out’ of their employment rights? Such potential disputes would detract entrepreneurs from the job government is tasking them with- developing their business and this boosting the economy- and could end up in costly and time consuming litigation.

The proposal comes at a time when the government is also consulting on radical reforms to the employment tribunal system. Its objectives are to achieve earlier resolution of workplace disputes in the hope of making business more confident about hiring people. The proposals range from the well publicised increase to the minimum qualifying period for unfair dismissal claims to two years and requiring the payment of a fee in order to lodge a tribunal claim to formalising the system of making settlement offers and allowing some claims to be heard by a single judge rather than a panel. Unions and employee groups have already expressed serious concern that the changes will hinder access to justice, especially for less affluent employees.

However, it is not all good news for employers: changes to the maternity and paternity regulations scheduled to come into force at the beginning of April, will mean that mother and fathers can share leave after the birth of a child or an adoption, potentially adding more costs to business. How this tallies with the other proposals is unclear, and perhaps even more galling for those employees working for very small firms who might seen their rights stripped back whilst those in larger employers see their rights bolstered. Perhaps this will have a the counter effect to the governments intentions- who would want to work for a small business when they are offered such unattractive packages?

The wider economic climate will continue to influence the direction of employment law but government will need to consider more carefully the legal implications of their proposals - if an overly simplistic or bullish approach is taken businesses could find themselves embroiled in costly disputes and may struggle to recruit, even in this challenging market. 

Laura Evans is an Associate in the Employment team at Fox Williams LLP
 

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