Putting the ‘unfair’ back into unfair dismissal?

The Government has announced that the qualifying period for the right to bring an unfair dismissal claim will increase from one year to two years from 6 April 2012.

The announcement follows a consultation, launched by the Government in January 2011. It said that it was considering increasing the qualifying period from one to two years in order to:

“…contribute to our overriding objectives of encouraging growth through giving businesses more confidence when they consider taking on people. Alongside the other measures proposed in this consultation document, we believe it may also help improve the employment relationship, giving more time to get the relationship right and, in a modest way, reduce the number of disputes that go to employment tribunals…We do not see this as a charter for businesses to sack people unfairly.”

Many employers will rejoice in this news. Indeed, the CBI announced on 1 October 2011 (bizarrely, two days before the announcement was made) that it welcomed the government's announcement. John Cridland, the CBI’s Director General, said:

“Extending the qualifying period for unfair dismissal is a very positive step.

We have been urging the Government to do everything it can to make it easier for firms to grow and create jobs, and this will give employers, especially smaller ones, more confidence to hire.”

However, many commentators are concerned that the move may not achieve the desired result.

First, increasing the qualifying period will not mean that employees who believe that they have been treated unfairly will simply go away. There is a real risk that they will seek to claim that they are instead the victims of discrimination, or that they have been penalised for whistleblowing or raising health and safety issues. These claims are considerably more complex (and expensive) for employers to defend.

Second, there is a risk that the two year qualifying period may be found to be indirectly discriminatory. Women and younger workers in particular are less likely to have two years' service than men and older workers respectively. Indeed, the issue of sex discrimination was raised in 1999 when the qualifying period was reduced from two years to one year.

The Government’s response to the consultation has not yet been released, but many organisations have published their responses online. The EHRC, for example, has expressed concern that the measure could have a discriminatory effect, and has urged the Government to monitor the situation. If the measure is challenged, the Government will have to show that it had a legitimate aim (increasing employment) and that this was a proportionate means of achieving it. The EHRC notes that the Government has not adduced any evidence in the consultation document to show that it will have the intended effect of increasing recruitment levels. However, the Institute of Directors’ response cites a survey which indicates that less than half (46%) of respondents said that they would be more inclined to take on another employee. Another survey, carried out by Pannone, indicates that just 17% of respondents might take on further staff as a result of the change.

There is therefore a risk that the Government may find the measure hard to justify.

Third, from a wider perspective, the Government is taking away protection from employees at a point of great economic uncertainty. Many people will be worried about losing their jobs. To remove the protection of unfair dismissal will increase this uncertainty. The lack of certainty could have a profound effect on people's willingness to spend and grow the economy. For instance, employees may think twice before entering into a major financial commitment such as a mortgage.

When the Government publishes its response to the consultation (due ‘this autumn’, according to the Government), it will be interesting to see the arguments that persuaded it to press ahead with the proposal, which the Administrative Justice and Tribunals Council described as being ‘based on limited evidence and [which] will bring little benefit to employers or to the tribunal system while having a disproportionate and chilling effect on employees’.

A copy of the BIS press release can be found here.