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  • Writer's pictureRobert Spicer

Employment law reforms

“V” for Vendetta

In a recent speech, David Cameron lauded the ease with which employees, in the UK, can legally be fired, relative to other European practices. At the same time, Business Secretary Vince Cable announced a consultation on adopting “protected conversations” in the workplace, the theory being that employers will be protected from workers reporting conversations regarding performance or retirement, to a tribunal.

The move comes in the wake of the coalition Government’s abolition of the Agricultural Wages Board, first established in 1948, which protects the rights of one of the lowest paid sectors of the economy. Even Thatcher didn’t go there.

Effective from April of this year, there are proposals to increase the qualification period for bringing a claim for unfair dismissal, from one year to two. In addition, there is talk of reducing the consultation period for collective redundancies from 90 days to just 30, diminishing worker protection during business transfers and introducing fees in employment tribunals.

The consultation on these fees, set to commence in April 2013, has a very specific purpose: not to advise on the fundamental principle of charging claimants as one might have thought, nor to analyse the potential effect this may have on access to justice. No. The aim of this consultation is to draw up plans for the charging structure, or rather, the way in which people will have to pay for the privilege of exercising their rights.

Supporters of reform have attempted to argue that the current tribunal system is failing, with the number of claims rising 44% over two years, totaling 218,000 in 2010. Yet whilst proposed prohibitory measures will undoubtedly serve to curtail the number cases passing through the employment tribunals, the prospect of charging potential claimants will inevitably preclude those most vulnerable from seeking justice in the courts, filtering out cases based on ability pay, rather than merit.

A further consultation carried out last year on potential employment tribunal reforms included plans for increased deposit orders, mandatory pre-claim arbitration through ACAS, unfair dismissal claims to be heard only by a judge and the termination of payment of witness expenses. Coupled with these changes, are whispers of “no fault” dismissals for companies employing just ten people or less, further restrictions being placed on the amount of compensation given for discrimination, diminishing rights under the Working Time Directive, removing union reps from the payroll of public bodies, making it harder for unions to ballot for industrial action and the list goes on.

Ok, so it wouldn’t be the first time a Tory-led government has expressed a slight aversion to the trade unions, but one could be forgiven for thinking that these proposals constituted an all-out vendetta on workers’ rights. And all of this at a time when unemployment is at a 17 year high and workers’ sense of confidence and security, at an all time low.

The avalanche of proposals certainly does not sit well with the Government’s supposed commitment to social justice and fair practice. So what is the reasoning behind Cameron’s war on employment rights and what are the implications?

The theory behind the onslaught, according to the Tory camp, is to cut red tape for businesses and boost Britain’s flailing economic growth levels. Jumping on the bandwagon of popular complaints against health and safety laws, employers’ organizations appear to have convinced the Government that the current state of paralysis which has gripped the British economy stems from businesses’ fear of hiring people.

Their answer: curtail employees’ rights, allow businesses free reign to hire and fire willy-nilly and exacerbate the sense of instability that is crippling the housing market, constricting consumer spending and pushing up unemployment levels. The logic is tenuous to say the least.

What is most concerning of all, however, is the fact that the Government’s own surveys do not seem to necessitate the conclusions reached. As Iain Birrell, partner at Thompsons Solicitors, has highlighted, there is ‘a gap between what drives ministers ideologically and what their own evidence is telling them.’

When a report commissioned by Cameron and produced by Lord Young, determined that there was no real need for reform or repeal of health and safety legislation, the Government simply asked the question again. So Work and Pensions Secretary Chris Grayling commissioned Professor Ragner Loftstedt to produce the right answer. The correct right answer that is.

And even that did not go quite as planned. After months of careful consideration, in-depth analysis and exacting assessment, Loftstedt promptly arrived at much the same conclusion as his predecessor; that the UK’s health and safety laws “are broadly right”. Undeterred, Grayling has nevertheless proceeded to announce “a major cut back of health and safety red tape”. Loftstedt is said to have been unimpressed.

Similar reports commissioned to assess the impact of proposed unfair dismissal claims illustrated that there is no correlation between employees who have only just attained the qualifying period and those making the majority of claims. And whilst the Tories are championing employment law reforms as the answer to the small business’ woes, the BIS Small Business Survey 2010 concluded that, in fact, employers find National Insurance and tax systems infinitely more burdensome than employment laws.

So it seems that no matter how hard Cameron tries to mould the evidence to support his preconceived conclusions, he just can’t make it fit.

To add to this sense of instability are claims of a rift at the very core of the coalition, stemming from Cameron’s support of a controversial proposal to allow businesses to fire staff who perform poorly, without explanation, in exchange for a minimal compensation payment. Clearly feeling that previous independent reports were a little too, well, independent, Cameron called on his old chum Adrian Beecroft, venture capitalist, Conservative Party donor, and adviser to Cameron’s policy guru Steve Hilton, to offer a wholly objective and utterly insightful super-plan for economic growth.

The results, described by some in Whitehall as “flimsy”, have provoked uproar, not least from deputy Prime Minister Nick Clegg and Business Secretary Vince Cable, who are said to have instantly blocked the proposals, calling them a reversion to “Victorian employment practices”. Indeed, opponents to the plan have highlighted that not only is there no reason to believe that abolishing unfair dismissal claims will help the economy, to the contrary, diminishing job security is likely to quash consumer spending.

Whilst deadlock between the coalition parties means that the plans are unlikely to go ahead, the Beecroft Report has not gone completely unheeded; the “no fault” dismissal proposals for small businesses and “protected conversations” derive from it. Business Secretary Vince Cable, who insists he does not want to spread fear of “the sack”, has endorsed both, despite his vehement opposition to the original report.

Equally worrying, are arguments that proposals for “protected conversations” open the door to significant potential for abuse. Allowing employers this freedom will, it is suggested, allow them to bypass correct procedures for dismissal, particularly within the two years in which they will now be guarded from unfair dismissal claims. And what if “protected conversations” extend beyond their original remit of capability and misconduct, to issues of discrimination, redundancy or pay? Of course, the majority of responsible employers will not use “protected conversations” to intentionally deny employees their rights, but they provide those who are that way inclined, a convenient opportunity to bully, abuse and manipulate.

Brendan Barber, General Secretary of the TUC, expressed similar concern when he commented recently, “Reducing protection for people at work will not save or protect a single job.” He added, “It’s not employment law that is holding firms back; it’s the tough economic climate and the problems companies are having getting the banks to lend to them that are to blame.”

So it seems that whilst there are undoubtedly occasions where excessive regulation and red tape can stifle job creation, this does not appear to be one of them. Granted, Britain’s relatively flexible labour relations have proved advantageous throughout the economic slump – moves to cut back on hours rather than reduce the workforce meant that a 7% drop in national income yielded just a two point fall in the employment rate – but any notion that a regulatory abyss will promote greater growth or stability is belied by a fleeting global analysis.

America’s unobstructed capitalism, for example, witnessed significantly more job cuts than that of a comparatively more collectivist Germany. There, whose workers are able to make a claim for unfair dismissal after just six months’ employment, are entitled to at least four weeks’ notice in the first two years of employment, compared with just one week in the UK and where a work council must be heard by an employer before a worker can be dismissed.

Whilst George Osborne has said of our employment laws, “it’s no good comparing ourselves with other European countries”, perhaps he has something to learn from a Germany which, according to the Office of National Statistics, is the second most productive country in the G7, with productivity consistently around 20% higher that that of the UK over the past ten years, and basking in a significant trade surplus in the face of the UK’s trade deficit.

So whilst Beecroft and his Tory comrades might advocate a system which, by his own admission, means “some people would be dismissed simply because their employers do not like them”, common sense must surely dictate that a work force which is secure, confident and is treated with respect, stands a significantly better chance of inspiring growth than one riddled with vulnerabilities, insecurities and paranoia. To put it in words even a Tory will understand; a frightened horse never wins.


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