On 10 January 2011, the Prime Minister held a ‘jobs summit’ at number 10 with 19 leading UK employers as part of his stated commitment to a “pro-business, pro-growth, pro-jobs agenda”. The Government is also preparing to launch an “employers’ charter”, aimed at encouraging employers to create jobs by reducing the risk of Employment Tribunal claims.

Two significant proposals for the charter include:

• making employees pay a fee before they can bring a Tribunal claim; and
• increasing the time for which an employee must generally be employed before bringing unfair dismissal claims (the qualifying period) from one year to two.

However, critics argue that the charter will do little to promote jobs and may in fact encourage employers to dismiss staff.

The British Chambers of Commerce has called for Employment Tribunal reform, urging the Government to consider introducing fees for claims and reduce the wait time for a first hearing. According to the BCC, the cost of defending claims (an average of £8,500) compared with settling them (an average of £5,400) means that it is often cheaper to settle. Employers, they say, are facing increasing numbers of claims and three-fifths of claims settle, not because employers are afraid of losing at the Tribunal, but because employers want to minimise costs and inconvenience. The BCC criticised the current system as too slow and “overwhelmingly weighted in favour of the employee”.

However, the TUC has warned that any major changes to the system could stop wronged employees from seeking justice and give the ‘green light’ to rogue employers to break the law. They argue that increasing the qualifying period for unfair dismissal claims to two years would prevent thousands of employees from challenging their employers, and would allow companies to sack staff at whim. A Tribunal fee for claims would also deter many employees with genuine cases, particularly the lower-paid. The TUC General Secretary Brendan Barber called for a focus on good employment practices and workplace resolution. The TUC points out that the vast majority of cases taken last year were multiple claims for equal pay or working time, covering large groups of employees, and that individual claims have not increased. As for costs, the TUC pointed out that the power to require deposits and make costs orders in respect of “vexatious or misconceived” claims already exist, even if they are rarely used.

The Chief Economic Adviser at the Chartered Institute of Personnel and Development, Dr John Philpott, welcomed the jobs summit as evidence of the Government’s commitment to switching focus away from spending cuts and tax increase, and towards economic growth and job creation. However, he warned that allowing employers to dismiss employees within the first two years of employment without the risk of unfair dismissal claims would do nothing for jobs in the short run and would have, at best, only a limited impact on the economy’s underlying job creation.

Dr Philpott said that the evidence on the effects of employment protection law, whilst ‘equivocal’, suggests on balance that less protection encourages increased hiring during periods of economic recovery, but also results in increased firing during a downturn. He said that it was arguable that, had such an “employers’ charter” been in place during the recent recession, there would have been more redundancies, which would have been detrimental to fostering a culture of genuine engagement and trust between employers and staff.

We will continue to watch and report on how the “employers’ charter” develops. Our concern is that, far from reducing the number of Tribunal claims, increasing the qualifying period for unfair dismissal may encourage employers to dismiss on flimsy grounds and may lead to more discrimination claims, for which there is no qualifying period.

For further information regarding these issues please contact a member of our Employment Law team.