Mark Shulman, an employment law specialist at Keystone Law speaks to LBC radio station on the proposed imminent changes that could affect employers and employees rights in the workplace.
LBC: The time now is 8.02 and time to talk to Mark Shulman, he is an employment law specialist at Keystone Law. Thank you for joining us Mark.
MS: Good afternoon to you.
LBC: "Good afternoon. Well there are very big changes we're told by the government in terms of employers and employees rights. How significant are these changes?"
MS: Well they are significant because there is no doubt that in broad terms there are various proposed measures which make it easier for employers to terminate employees and employment and if they do so, it will be much cheaper to resolve employment disputes.
LBC: "And do you think this is a sort of typing the balance back far too far in the favour of employers over employees or is this sort of bringing things back to a sort of a more even keel?"
MS: Well I believe the government's stated intention is to achieve a fair balance between employers and employees. The Business Secretary has said that the government is trying to have the best of both worlds, and so the balance is very much between confidence in business, so they can hire people. But at the end of the day, if there is a bad relationship between the employer and the employee, there are still basic labour rights and protections for those employees.
LBC: "Well this is it because we're often told, well employers shouldn't be able to get rid of people just at will and there was a proposal which was originally put forward to allow employers to fire workers at will, with no particular reason given, as long as they paid them adequate compensation and that's not going ahead. But why shouldn't an employer, as long as it's not because of say their colour of their skin, or their gender or their sexuality, why should they not be able to choose who they do and do not employ?"
MS: Well within reason, subject to the point you've made, they can choose. But employers do have various responsibilities under complex employment legislation which means that it's not entirely straightforward to go through that process. But the new reforms as proposed, do have a number of measures which undoubtedly make it easier, particularly for small businesses to resolve employment disputes if staff are dismissed.
LBC: "Is it a genuine big issue for a lot of business that they can't get rid of staff they want to get rid of? Or is this one of those making up of a….a solution to a problem that doesn't really exist?"
MS: Well it is the case as you've already mentioned earlier that often employees bring claims, which might be entirely vexatious and it's quicker, easier and cheaper for employers to settle the case then it is to go to a Tribunal to dispute it. And so that can be the case. I'm not saying there aren't genuine claims. Of course there are genuine claims. But it's always a question of striking a balance.
LBC: "Well that's it. In terms of the cost for an average employer, what sort of numbers are they looking at in terms of the cost of going to fight a case, which they believe where they've gone through all the right procedures and they've asked someone to leave for perfectly genuine reasons but they've been taken to Tribunal. What sort of costs would an employer face?"
MS: Well it could be tens of thousands of pounds depending on the nature of the case but there's clearly different types of cases and cases last different lengths in terms of hearings. So it's difficult to put an average figure. But what is the case is that in terms of compensation, for example, for unfair dismissal, the average award is fairly low. Something less…the average is something less than £5,000. So it's easy to see that the costs of going to a Tribunal could well exceed the cost of any compensation award that maybe made at the end of the day.
LBC: "And very difficult to get those costs back even if they are awarded against you, simply because the employee in this situation often will not have those means to be able to pay them anyway?"
MS: Well not only that but in Employment Tribunals unlike the Civil Courts, costs do not automatically follow the event in the sense that the winner gets their costs back.
MS: It's only possible to get costs in limited circumstances where a person for example, has been vexatious or they have behaved unreasonably in the way they have brought the claim or conducted the case.
LBC: "So we will see a lot of cases where they've been settled simply because…and the employer has done nothing wrong, believes they've done nothing wrong, they probably will almost definitely win their case in those circumstances but they think, it's simply not worth it. We'd rather pay out say £5,000 to somebody than to go through all the stress and the strain, the time involved and the huge extra expense of fighting a case to sort of prove their good name. You sign a confidentiality agreement, pay the £5,000. Job done."
MS: There will be cases which fall in that category. And one of the government's proposals, as you mentioned earlier, is to reduce the maximum compensatory award in unfair dismissal cases. It's currently, the maximum compensation that can be awarded, in terms of compensatory element is £72,300. That's a historic high figure. What the government is proposing is to reduce that to the national legal average earnings, something around £26,000 or in an individual case, if their salary is less than that, an annual net salary. So that would significantly reduce the amount of compensation, which an employer would be liable to pay, if these proposals are effective.
LBC: "That would make a big difference, someone one who is a higher earner in terms of what they could expect to get in a Tribunal?"
MS: Yes it would make a significant difference. And although a lower cap on compensation does not make it easier to dismiss staff, because an employer must still act reasonably, it does make it cheaper to settle the case where there is a dispute.
MS: The other aspect is that one of the real problems that we've already talked about, if that where there are vexatious or unreasonable claims that are put forward, this needs to be dealt with by more rigorous weeding out of unmeritorious cases and dealing with issues such as costs…
LBC: "So…and dealing with it…"
MS: …and the financial….
LBC: "…early in the system, not waiting for it to actually go to Tribunal."
LBC: "Just weeding them out much at an earlier stage, a sort of triage system, effectively."
MS: Yes. And also I would mention that under the new proposals the government is looking at what are called settlement agreements, which effectively are legally binding documents which can be used for example, to end an employment relationship. Typically an employee will receive a severance payment and perhaps a reference in return for waiving their rights to take a case to the Employment Tribunal.
MS: So that can reduce, if these are implemented, this new form of settlement agreement, this can reduce the amount of time, and legal resources which an employer would require to resolve the matter.
LBC: "And of particularly big benefit to very small employers. Mark Shulman, pleasure to talk to you here at LBC 97.3. He is an employment law specialist as I am sure you could tell from his expertise there at Keystone Law. Much appreciate your time. So that's the legal side of things, big changes afoot. If you're an employer, you'll probably welcome these. If you are an employee you may not. But I am sort of the view if you are a good employee…."
This article is for general information purposes only and does not constitute legal or professional advice. It should not be used as a substitute for legal advice relating to your particular circumstances. Please note that the law may have changed since the date of this article.