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Cable’s changes

8th December, 2011

After many months of rumour, Business Secretary Vince Cable has announced the government’s proposals for what is claimed to be the biggest shake up of employment law for decades.  The reform aims to ease the burden on employers when they recruit, manage and dismiss, whilst maintaining the requirement to be “fair” to employees.

During his speech Dr Cable announced the following results of consultation on resolving workplace disputes and proposals within the Red Tape Challenge review of employment law:

–     A proposal for “micro-firms”, employing 10 workers or fewer, to dismiss under-performing employees through a compensated “no-fault agreement” which would provide cash settlements for employees and prevent them from bringing a tribunal claim for unfair dismissal at a later stage.

–     To seek views on reducing the current collective consultation period for redundancies of 100 or more employees from 90 days down to 60, 45 or 30 days.

–          A consultation on “protected conversations” to allow employers to discuss issues such as retirement or poor performance without the discussions being used at a subsequent tribunal claim. A proviso was included stating that the proposal will not extend to protect discriminatory acts.

–          A further consultation on measures to simplify compromise agreements, which will be renamed ‘settlement agreements.’

It was confirmed by Dr Cable that the qualification period for making an unfair dismissal claim will increase from one to two years of continuous employment from next April.  He also said that in the future, all claimants will be obliged to submit their complaint to ACAS, so that parties are given an opportunity to resolve their dispute through conciliation before proceedings can be issued in the Employment Tribunal.

Whilst business groups such as the CBI and the British Chambers of Commerce welcomed the proposals, Trade Union leaders have expressed concerns that the balance of power is being tilted even more against the ordinary worker.

Although on the face of it, the proposals aim to assist employers and their businesses, the proposed reform maintains the requirement for employers to act fairly.  On this basis it will still be important to act fairly (and no doubt, reasonably) and advice should still be sought in advance to protect against any potential liability in the event of a claim.  Employees will still be protected by other employment law legislation.

The increase in the qualification period for unfair dismissal will afford employers the freedom to assess an employee’s suitability and dismiss within the first year and 51 weeks before being faced with an unfair dismissal claim (save for claims of automatic unfair dismissal which fall within the listed exemptions and/or discrimination claims which offer protection even before employment begins).

If implemented, the compensated no fault dismissal proposal for “micro-firms” would enable smaller firms to recruit without the worry of a tribunal claim for dismissing an employee unfairly.  With unemployment figures rising, this proposal is designed to encourage employers to recruit.

If your business is looking to recruit, you may wish to consider taking advice from our specialist team of employment solicitors on the different forms of contracts and take the opportunity to update your contracts.  Please contact Claire Brook in our employment team for further information.

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