Unfair Dismissal – is there a case for reform?

September 25th, 2012

Part of the government’s agenda for growth has been a package of suggested employment law reforms. If businesses were liberated from the tyranny of red tape then they would be free to employ more individuals, or so the argument went. My earlier blog set out how Vince Cable has rowed back to some extent from the views set out in the Beecroft report. However, there is still a lingering belief that employers are constantly (and unfairly) being dragged through employment tribunals by recalcitrant former employees. The increasingly right wing conservative party want more compromise agreements and less employment tribunals. So what do the latest statistics from the Ministry of Justice show?

Well firstly they show that the number of claims lodged in employment tribunals between April 2011 and March 2012 has fallen 15% on the previous year and is 21% lower than in 2009-2010. The notion of rapidly increasing number of claims is not borne out. This in of itself reinforces the importance of formulating policy on the basis of considered research and not by anecdote.

If you dive further into the detail the need for the proposed reforms becomes less clear still. Unfair employment claims have been targeted by the government as an area that needs improvement – namely, increasing the eligibility period from 1 to 2 years of service. The logic for this is that many unmeritorious cases go to tribunal. Well of the circa 46,100 unfair dismissal cases disposed of (i.e. concluded at a hearing or otherwise) only 18% made it to a final hearing of which around 10% were unsuccessful at hearing. Around 42% of unfair dismissal claims were resolved through an ACAS conciliated settlement. In fact, unfair dismissal claims had the highest rate of ACAS settlements of any type of claim.

More interesting still, in those instances where costs were awarded in all employment tribunal claims, the vast majority were awarded to Respondents. The average award was £1,292. Whilst this does not reflect the costs for bringing or defending most claims, it reflects the ability of individuals to pay. Tribunals have to take into account the means of an individual or company when making an award.

Is there a case for reform of employment law? Probably. However, until the Tory-led government addresses the real rather than imagined problems with the system, we are unlikely to see changes of the kind we need.