Osborne and Cable stack tribunal odds against workers

George Osborne announced at the Conservative Party Conference that from April 2012 workers will have to be employed for two years instead of one year to qualify for unfair dismissal protection.

21 November 2011

Claimants will also have to pay a fee to lodge a tribunal claim and a further fee if the case goes to an employment tribunal hearing. These fees will only be returned if the claimant ultimately wins.

According to Vince Cable these changes are necessary because “businesses tell us that unfair dismissal rules are a major barrier to taking on more people.”

The statistics indeed show that the employment tribunals dealt with 49,600 unfair dismissal claims last year. But behind the headline figure, the statistics also show that 12,300 of these complaints were withdrawn by the claimant, 6,800 were struck out by the tribunals (in most cases without a hearing), and that a further 20,500 reached a conciliated settlement.

That left only 10,300 cases that actually went to a full tribunal hearing, of which the tribunals dismissed 6,100 complaints. This means that a mere 4,200 were successful. That is to say, less than 10% of unfair dismissal claims led to a finding of unfair dismissal. And of these 4,200 successful cases, compensation was awarded in only 2,608 of them, that is to say in about 5% of all claims.

If the rate of success of unfair dismissal claims seems an unlikely explanation for the burden of which employers complain to George Osborne and Vince Cable, perhaps the level of compensation is the problem. But here too the Ministry of Justice tells us that the median award of unfair dismissal compensation was the princely sum of £4,591.

Can this rate of failure and the modest level of compensation awarded really cause employers not to employ the workers they need? Or is it the case that business is simply crying wolf? Perhaps the explanation is the fear of the primary remedy for unfair dismissal, said by the statute to be an order for reinstatement or re-engagement of a worker who is unfairly dismissed.

It is true that the number of reinstatement and re-engagement orders has increased sharply, by a mighty 33% in the last year. However, the actual figures take some of the wind out of that achievement, for the increase was from a mere SIX such orders made last year to only EIGHT this year. Very few – if any – unfairly dismissed workers get their jobs back.

It does not require a very sophisticated mathematician to work out that in round terms only 1 in 500 successful cases result in a reinstatement or re-engagement order (0.19%), or about one in five thousand of all the unfair dismissal claims lodged. This surely cannot be the problem, particularly as it is also the case that the employer cannot be required to comply with a reinstatement or re-engagement order.

Quite what rational justification there is for the government’s proposed changes is thus difficult to fathom. If it is genuinely the case that employers are concerned about unfair dismissal law as a barrier to recruitment, Messrs Osborne and Cable would have been better advised to distribute copies of the statistics rather than to change the law.

For while it is true that the increase in the qualifying period for unfair dismissal from one to two years is estimated to remove unfair dismissal rights from about three million workers, this will avoid only 2,000 claims annually, of which (on the basis of current statistics) only about 100 workers would be likely to recover modest compensation.

But if the extension of the qualifying period is disproportionate, the introduction of fees for the often low paid workers who use the unfair dismissal regime seems deliberately to discourage. In addition to the initial stake of between £150-250 to lodge the claim, applicants will have to stake a further £1,000 if the case goes to a hearing, with less than a one in three chance of recovering compensation.

The odds against the claimant are grim. To recover these fees, he or she must win. But only 40% of claims that stay in this long are likely to succeed, which means that 60% will suffer a serious financial penalty for seeking access to justice. It is hard to see that any more than a trickle of unfair dismissal claims will, after April 2012, reach the tribunals, with claimants being forced to under – settle good claims, or to give up.

Yet the truth is that unfair dismissal law does not impose undue burdens on business. Rather, it offers minimal protection for workers: too many are excluded from the legislation; it is too easy for an employer to justify a dismissal as not being ‘unreasonable’; and the remedies for those who are dismissed remain wholly inadequate.

While we can understand where George Osborne is coming from, it is to these real concerns that we might have expected Vince Cable to have directed his attention. If the Liberal Democrats are unable to stand up to the Tory bullies on behalf of the most vulnerable and badly treated sections of the workforce, what purpose do they serve in government?

This article first appeared in Tribune 21 October 2011