What if the government increased the qualifying period for unfair dismissal rights?

by Laurie Anstis on November 1, 2010

Vincent Moss, Political Editor of the Sunday Mirror, reported this weekend that David Cameron was intending to increase the length of service necessary to qualify for the right not to be unfairly dismissed from one to two years.

The report cited only “leaked government plans” as evidence for this, but what if the government really was planning to increase the qualifying period for unfair dismissal?

Background

The reported new qualifying period of service of two years has actually been the norm for most of the existence of unfair dismissal law. It was only in 1999 that the qualifying period was reduced to one year. It had previously been two years. [Update – see comment from Mrs Markleham below.]

Until the mid-1990s there was also a special qualifying period for part-time employees (defined as those working under 16 hours a week) of five years. This was successfully challenged as amounting to indirect sex discrimination in R v Secretary of State for Employment, ex parte Equal Opportunities Commission [1994] IRLR 176, and there is no suggestion in the report that the previous distinction between full time and part-time workers either would or could be revived.

The two year limit was itself unsuccessfully challenged on grounds of indirect sex discrimination (the argument being that women tended to have shorter service than men) in the case of R v. Secretary of State for Employment ex parte Seymour-Smith and Perez (No.2) [2000] IRLR 263. While accepting that the two year qualifying period did have a disparate impact between men and women, the House of Lords concluded that there was objective justification for the two year qualifying period. However, by that time the government had already committed to a reduction to one year – one of the first pieces of employment legislation of the new Labour administration lead by Tony Blair.

Today’s politics

The Conservation-Lib Dem coalition committed in its first budget (pdf, para 1.67) to require each government department to review the employment legislation for which it was responsible “to ensure maximum flexibility, protect fairness and promote competitiveness“.

So far, the government’s employment law program has seen the implementation of the Equality Act, a proposal to abolish the default retirement age and a commitment to implement the Agency Workers Regulations without amendment. Many employers would see this as an increase, rather than a decrease, in regulation, and with that in mind it is hardly surprising that the qualification period for unfair dismissal rights might have attracted the government’s attention. To increase the qualifying period would be an eye-catching measure that would be perceived as business-friendly. It is also significant that the basic unfair dismissal rules remain a purely domestic measure that is not bound by EU regulations in the same way as, say, discrimination law is. The influence of EU law in the field of employment law leaves only limited scope for deregulation in domestic legislation.

If the government is looking for a headline business-friendly measure, it might be said that they would be better off reducing the maximum award for unfair dismissal. Any such reduction could be presented as continuing to protect lower and middle-income employees (whose awards would rarely reach the current maximum) while limiting the awards available to “fat cat” higher earners. However, this may not be so easy to achieve. Darren Newman says that a change in the qualifying period could be made by secondary legislation but a change to the maximum compensatory award only made by the more laborious primary legislation process.

Consequences

What if the government did increase the qualifying period? What would the consequences be? Here are some suggestions:

1. There would be a decrease in the number of basic unfair dismissal claims brought to the tribunal. The increase in the qualifying period would put off employees (particularly those who are acting in person) with between one and two years service from bring unfair dismissal claims.

2. There would be an increase in the number of “special” unfair dismissal claims and discrimination claims brought to the tribunal. Claimant representatives are already highly creative in seeking to make their client’s claims fit within the “special” categories of unfair dismissal (such as dismissal for whistleblowing), or presenting them as discrimination claims, neither of which require any qualifying period. Such claims tend, by their very nature, to be more contentious. If basic unfair dismissal claims are replaced by special unfair dismissal and discrimination claims then in practice this is going to be more difficult for employers despite the apparent deregulation.

3. Employees with less than two years service will be more vulnerable in restructuring and redundancy exercises (including likely public sector redundancies).

4. Employers may become less rigorous in their employment practices. If an employee can be dismissed with minimal formality within the first two years of their employment, there may be less of an imperative for busy employers to address problems or underperformance at an early stage.

5. The stark prospect for employees with under two years service is that they could end up being unfairly dismissed without having any entitlement to compensation or judicial recourse.

I would love to hear from commenters whether you think the government really looking at this and, if these plans are implemented, what would the consequences would be.

(See also Michael Scutt’s blogpost on this subject.)

12 comments

[…] This post was mentioned on Twitter by SundeepBhatia, Legal Bizzle and Laurie Anstis, Laurie Anstis. Laurie Anstis said: New on worklifelaw.co.uk – What if the gov’t did increase the qualifying period for unfair dismissal rights? http://t.co/H2CxfCF #ukemplaw […]

by Tweets that mention What if the government increased the qualifying period for unfair dismissal rights? | Work/Life/Law -- Topsy.com on 1 November 2010 at 3:37 pm. #

Not sure there will be much impact in practice. May be slightly more discrimination and whistleblowing claims. Possibly a lot of media excitement about how we live in an employers’ world!

by Helen Goss on 1 November 2010 at 3:57 pm. #

This is only beneficial to employers with a short-term approach. Unfair Dismissal rules aren’t as onerous as urban myth suggests, and properly applied can encourage good management of employee performance issues. Managing under-performance properly benefits both employer and employee. By postponing the requirement for companies to act reasonably in managing employees, many companies will lose good staff. In any event, if the decision to dismiss is based on race, age, gender etc, unscrupulous companies may just find unfair dismissal claims are simply replaced by discrimination claims.

by David Stanley on 1 November 2010 at 4:20 pm. #

I agree with much of what has been said. It’s likely that it will simply lead to more claims on issues which require no service (discrimination etc) and also encourages short-termism from employers. I’d also be interested to know exactly how many claimants have between 1-2 years service – in my experience most have 2 years +

by Simon Jones on 1 November 2010 at 6:03 pm. #

The qualifying period has not always been at 2 years prior to 1999. It was originally 6 months when unfair dismissal was “invented” in 1971, and one of the first things Thatcher’s Tory government did after coming to power was to raise it to 1 year in 1980. They raised it again to 2 years in 1985, where it remained until Labour dropped it back to 1 year in ’99.

And who was it who was hired in the early ’80s by Employment Secretary Norman Tebbit to tackle unemployment, later to join the Cabinet, receive a peerage, and be appointed Secretary of State for Employment in 1985 and Trade and Industry in 1987? Enter David (now Lord) Young. This idea had his fingerprints all over it first time around, so it’s hardly surprising that he’s proposing it again.

As for what it might mean? Well, I suspect it’s more a question of Young trying to bring his old policies to life and appease the business lobby who are, as ever, in a panic over the number of tribunal claims – see Gearing up for growth, which argues that the recent “boom in the number of claims will affect employers’ ability to direct resources towards achieving future growth”.

Will it actually reduce the number of employment claims? I think there was some reduction, although I don’t think it was very much, in ’80 and ’85, so I’ll see if I can dig out the stats.

Will it “stimulate growth” (or whatever the buzzword is these days)? There seems to be a perception that fear of employment law stops people hiring. If you are a small employer and you need to get some work done, do you really think “I’d hire someone to do it, if it wasn’t for these pesky unfair dismissal laws”? I somehow dout that this is a major factor. A more serious restraint is probably the very real cost of additional salary, national insurance, pension, recruitment and training costs, rather than the theoretical risk of being sued if you happen to dismiss someone with between 1 and 2 years of service. People who are thinking they may just need someone short term, or are not sure of the level of demand, can still use a 1 year (or rather, if you want to be safe, 51 week) fixed term contract, or a zero-hour contract, or get an agency worker. The ability to sack people who have been there between 1 and 2 years without following a fair procedure is, I am thinking, a minor benefit.

I’m also guessing the government are struggling with their ridiculous one-out one-in policy and need to make sure there’s something to put in the “out” column. The effect of their recent publicity exercises in which they pretended they might actually get rid of (a) additional paternity leave and (b) the Agency Workers Regulations are probably starting to wear a little thin.

I think the main benefit is that it all makes for nice business-friendly headlines. I’m sure somewhere there’s a study showing that repeating the words “cutting red tape” over and over can reduce cortisol levels in lab rats.

by Mrs Markleham on 1 November 2010 at 6:47 pm. #

It’s just trying to please employers. In my opinion, it will just lead to employers not managing problems properly and sacking as and when.

I think the continuity of service should be reduced to protect more employees from being unfairly dismissed.

by Steven Mather on 2 November 2010 at 1:22 am. #

I’m not sure I can add much to what Mrs Markleham has covered above. I’d be very interested to know what the stats show from 1980 and 1985. There’s a lot more employment law around these days of course and I think you’ll find employees (with the help of their lawyers) trying to find discrimination claims and automatically unfair dismissal claims where the facts don’t really bear any such allegation out. It’s an easy headline for the government and maybe the Tories are trying to recover face with the business community who are in a state of rage over the Equality Act (well, Duncan Bannatyne is anyway) .

The government is supposed to be conducting a review of employment law – so what other steps might be on the agenda? You can guarantee that the £30k ITEPA concession won’t be going up – could that be for the chop though?

by Michael Scutt on 2 November 2010 at 7:34 pm. #

Thanks Michael.

The Work Foundation has some figures here, and reckon that it could cut the number of claims by 10,000.

by lanstis on 2 November 2010 at 8:38 pm. #

[…] being an advocate of the idea.  Look out too for the unfair dismissal qualifying period increasing from one year to two years. There are no firm plans for this, but it would have quite an impact if it came […]

by Top 5 employment law issues for 2011 | Work/Life/Law on 3 January 2011 at 3:28 pm. #

[…] are set to include an increase in the length
of service needed to claim unfair dismissal from one to two years
and a fee for starting employment tribunal claims. The BBC report
that this fee would be […]

by Proposals to reform employment law and employment tribunals | Work/Life/Law on 10 January 2011 at 7:57 am. #

[…] My Comment – This would certainly put employees at a disadvantage but could also lull employers into a false sense of security whereby they may lose focus on employees’ employment rights and employment law generally.  This could lead to employers facing more claims for automatically unfair dismissal, where an employee does not require any length of service to bring a claim and/or discrimination claims.  For an excellent discussion regarding the impact of this potential change on both employees and employers I would recommend reading Laurie Anstis’ blog post from November 2010 entitled “What if the government increased the qualifying period for unfair dismissal rights?”. […]

by The Friendly Employment Lawyer on 31 January 2011 at 4:08 pm. #

[…] My Comment – This would certainly put employees at a disadvantage but could also lull employers into a false sense of security whereby they may lose focus on employees’ employment rights and employment law generally.  This could lead to employers facing more claims for automatically unfair dismissal, where an employee does not require any length of service to bring a claim and/or discrimination claims.  For an excellent discussion regarding the impact of this potential change on both employees and employers I would recommend reading Laurie Anstis’ blog post from November 2010 entitled “What if the government increased the qualifying period for unfair dismissal rights?”. […]

by Government Consultation and Employment Tribunal Reform “Resolving Workplace Disputes – Public Consultation” | The Friendly Employment Lawyer on 31 January 2011 at 4:14 pm. #