Cameron Advisor suggests scrapping unfair dismissal law

Employment Law & HR update 07/11/2011

A leaked report commissioned by the Prime Minister, David Cameron, has called for lazy employees to lose their right to make unfair dismissal claims. Instead, the report suggests that staff could be "paid off" with notice and a redundancy payment in a scheme called "compensated no fault dismissal".

The Downing Street report said that, by removing the right to make a claim, those unproductive workers would be replaced by capable staff, thus boosting the growth of the economy. The report also suggests that, under the current rules surrounding unfair dismissal claims, certain workers are allowed to take advantage of the system as they are hard to get rid of.

The current rules mean that employees who feel they were unfairly let go from their jobs can file an unfair dismissal claim providing they have been in the position for over 12 months. As a result of this, some firms are thought to be wary of taking on new staff in order to expand, in case the individuals prove unproductive and are then impossible to sack.

The Daily Telegraph reported that the memo read, "The rules both make it difficult to prove that someone deserves to be dismissed, and demand a process for doing so which is so lengthy and complex that it is hard to implement. "This makes it too easy for employees to claim they have been unfairly treated and to gain significant compensation," added the report.

The report – which was written by venture capitalist Adrian Beecroft and has not yet been made public – comes as part of the coalition government's planned commitment to reforming employment laws.

Is this likely to happen?

What is clear is that David Cameron has asked for the law on dismissing employees to be looked at – so change must be a possibility. The government also wants to simplify business "red tape" and improve labour market flexibility, but is constrained by the problem that so much employment regulation is required under European Union law, and so cannot easily be removed. Unfair Dismissal law is a rare exception, and so could be changed by UK legislation.

However, when questioned about the leaked memo, the government has said that, currently, the suggested changes to unfair dismissal rules contained within the report are 'unlikely' to be implemented.

What might the changes mean in practice?

Allowing employers to dismiss poorly performing staff by simply paying them off would still result in a cost to employers – because they would have to pay an amount equivalent to a redundancy payment - but an argument in favour of the proposals is that at least the cost would be certain and the additional costs, both financial and time costs, of going through a tribunal process would be saved.

However, it is likely that employees dismissed in this way would simply allege unlawful discrimination – resulting in a tribunal claim with potentially unlimited compensation, which the employer might find it difficult to disprove.

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