Basement Jack - 02 November 2011

The lunatics are advising the asylum

Such were the levels of incredulity at suggestions in government that the right to claim unfair dismissal should be scrapped that Basement Boss himself came down from his thunder cloud to mock the berks responsible.

I should start by stating for the record that I am a huge supporter of the free market. I despise bureaucracy in all its forms and I detest over-regulation. I supported Margaret Thatcher's employment reforms of the 1980s and believe that the country today still benefits from the severe kicking that she gave the unions back then. I believed then and I still believe that the unions are out of touch with reality on so many issues and with their restrictive practices and short-sightedness they damage employment opportunities and the overall wealth of the country - their own members in particular.

The UK is a very nice country, which is why people want to live here.

Therefore it has come as a bit of a shock to find myself wholeheartedly agreeing with Brendan Barber, the General Secretary of the TUC on two issues in one week. First came the topic of executive pay: there is something very wrong with top executives awarding themselves massive pay increases at this time - very often with no justification. I just don't buy the "we have to be competitive or these people will all go abroad" argument. The UK is a very nice country, which is why people want to live here. Brendan is right, these massive pay rises are just pure greed.

The second instance where he and I were largely of one mind, and the principal subject for this article, centred on unfair dismissals. What caused me to choke on my morning cornflakes was the news that some rich crackpot lunatic was "advising" David Cameron to scrap all unfair dismissal protection for employees. What is more disturbing is that David Cameron has not immediately condemned the advice and invited the purveyor of that advice to go and live in Iran. Thankfully I don't think that this counsel will be heeded. Dave's caution is more to do with the fact that this particular crackpot is a major donor to the Conservative Party and cannot be offended rather than any conviction that this nonsense has any merit.

Sadly the Government does seem to be determined to water down the protection the law provides. We should expect to see charges for an employee bringing a case to tribunal and the qualifying period extended to two years. I heard Vince Cable argue this case with Brendan Barber on Newsnight a few weeks ago. Apparently our Vince believes that by doing so he will be creating thousands of jobs in small businesses who are currently too scared to employ anyone in case they are financially crippled by employment tribunal claims. This is clearly a response to fears from certain business leaders who themselves do genuinely believe that to lose an employment tribunal claim could be financially ruinous. Those business leaders are wrong and Vince should not listen to them.

Let's look at the facts:

  • The vast majority of all claims made to an Employment Tribunal do not actually get to a hearing.
  • Of those that do get to a hearing over 50% are found in favour of the employer.
  • Of those that are found in favour of the employee there is usually some contributory factor accounted for by the employee which reduces the amount of the award.
  • The typical award when made is around £5,000, although higher when discrimination is also found (but then it should be!)
  • Employees are expected to mitigate their losses by getting another job as quickly as possible and if they don't then they do not get a full award.

Tribunals will only award what an employee has lost except in the instance of discrimination. So it can only be loss of earnings. In discrimination there is something called the Vento scale which limits the amount paid to around a maximum of £5k for isolated acts of discrimination, £15k for sustained discrimination and £25k for continuous bullying.

I would submit that an employer is far more likely to be ripped off by a dodgy supplier or sued unreasonably by a customer.

Therefore any business person who is seriously not employing people for fear of the tribunals is clearly such a wimp that they should not be in business at all. It is of course true that one hears from time to time of vexatious (false and unjustified) claims against employers. Doubtless on some occasions these succeed. However I would submit that an employer is far more likely to be ripped off by a dodgy supplier or sued unreasonably by a customer than they are to be taken through an employment tribunal.

A competent employer should find it easy to stick to the rules regarding unfair dismissal. You must have a procedure in place that provides for warnings to be given and time for an employee to improve. There must be a right of appeal, and the employee should be allowed to have a colleague or union official with them at disciplinary or performance hearings. If an employer follows the very basic guidelines they are unlikely to fall foul of the law.

By contrast it is already an extremely daunting task for an employee to take their former employer to a tribunal. Most people never come into contact with the judiciary in their lifetime. Even though the system is set up to be as accessible and informal as possible the vast majority of us would not want to go through the hassle - especially if all you are going to get is a couple of grand. Even then it is still on your record that you took your employer to a tribunal - hardly the best recommendation to a future employer.

Employers tend to be more financially powerful than their employees and therefore the advantage is already tipped in their favour.

There are bad employees out there who may try to abuse the system and generally be a nuisance. There are also bad employers out there who already abuse their position and treat employees with contempt. Employers tend to be more financially powerful than their employees and therefore the advantage is already tipped in their favour. The idea that by tinkering with the current rules will encourage employers to take on more staff is quite frankly daft.

It is a pity that on this occasion at least, Dave and Vince don't take Brendan's advice and leave well alone. In fact I would go further. The suggestion that all protection for employees against unfair dismissal should be removed should be roundly condemned. The only winners in such a move would be unscrupulous or incompetent employers.

No one can say where exactly the right balance is between the right of employers and the rights of employees. It is certainly fair to say that it is easier and safer to fire employees in Britain than in any other major western country except perhaps the USA. Let us remember that we have had protection from unfair dismissal since 1971, introduced by a Conservative government. It must be wrong to be thinking of turning the clock back 40 years.