News focus: Vince Cable’s employment law ‘bonfire’

Business secretary Vince Cable’s speech announcing ‘radical reform to the employment law system’ reads oddly. It contains contradictions of the sort that do not usually make it into the final draft of a minister’s speech.

Cable (pictured) cited BIS research noting that 6% of small and medium-sized enterprises saw regulation as the main obstacle to growth - a notably low figure. Immediately afterwards, he said the government wants ‘to remove the perverse incentives in [the] current employment framework that can dissuade responsible employers from hiring new staff for fear of the costs… incurred if it doesn’t work out’.

Shadow business secretary Chuka Umunna - an employment law solicitor by profession - was quick to point up the contradiction: ‘Cable himself admitted that we already have a "reasonably good balance" between rights and flexibility in Britain. If this is true, why has the government made watering down employees’ rights to claim for unfair dismissal central to its approach?’

This was not the only line that seemed to be a coded message from a captive business secretary. He argued for the need to ‘provide job security in uncertain times’, in the sentence that preceded his announcement that the qualifying period for an unfair dismissal claim would be doubled to two years. And he lavished praise on Germany, which has a ‘model of employee relations where they treat their employees as a resource, an asset - they don’t think of them as a cost, a liability’. Yet German workers have much more protection at work and their economy is the powerhouse of Europe. Was the business secretary delivering this speech through gritted teeth?

Moreover, the meaning of the section of his speech relating to flexible working and parents is impenetrable, and has no specific proposal or consultation attached to it. As ever, Cable’s palpable discomfort in office makes for arresting theatre. But are the proposals mentioned - and those held out as the possible outcomes from consultation, a simple case of government being ‘captured’ by the employer lobby? And while Umunna certainly sounded cross about the erosion of workers’ rights, will Her Majesty’s Opposition in fact acquiesce to key changes?

Years of service

Three of the announcements point to a fundamental change in employment law that tips the balance of reform in favour of employers looking to: cut costs; be less at risk of paying compensation; and reduce the time spent managing disputes. Most concretely, Cable said that the employment qualifying period needed to claim unfair dismissal will be doubled from one to two years. Just as the business secretary provides no detail about the scale of meritless claims made between one and two years, so the opposition opted not to tackle this issue head on.

Objections from Umunna instead centred on the weak link between the change and economic growth. In comments sent to the Gazette, he said: ‘Watering down people’s rights at work by doubling the service requirement to claim for unfair dismissal from one to two years is not a substitute for a credible plan for growth.’

He added that there is ‘no empirical evidence’ to suggest such a move will boost job creation, and that it is ‘highly likely that this change will lead to more people bringing discrimination claims instead which have no service requirement’. That falls short of defending the status quo. And at this distant remove from the 2015 election, the opposition will not commit to reversing any changes to the unfair dismissal timeframe brought in by the coalition.

TUC general secretary Brendan Barber also decided that criticising the growth strategy was a stronger line to lead on than a specific defence of the one-year limit: ‘Reducing protection for people at work will not save or create a single job. It’s not employment law that is holding firms back, it’s the tough economic climate.��� But he did add: ‘Tribunals already have solid procedures for rooting out weak claims.’

Pay-to-sue

The proposal to charge a fee for lodging a tribunal claim, and another for taking it to a hearing, will be the subject of a Ministry of Justice consultation. But the level of detail provided by Cable points to this being a policy he intends to implement. It is proposed that the fee for a claim taken to a hearing will be higher for someone pursuing a claim for over £30,000. As a general rule in public policy, the more specific the figures used in a consultation, the more set in stone that policy is.

It may be about much more than a change in who bears the cost of the tribunal system. Kingsley Napley partner Richard Fox interprets the introduction of fees as a simple attack on access to legal remedies. ‘Of more concern is the fact that it may be being introduced on a novel basis,’ he explains, ‘namely, not to help defray the costs of the tribunal system in dealing with any particular claim, but rather to serve as a disincentive to an employee to bring a claim some might see as being unmeritorious. There are obvious implications for access to justice here.’

The idea of ‘protected conversations’ is another proposal subject to consultation, but which is specific enough to indicate strong government commitment. The content of a ‘protected conversation’ could not subsequently be used as evidence in a tribunal. It is suggested that the conversations could centre on retirement or performance management. On the subject of ‘retirement’, put simply, an employer would be free to suggest to someone that, although the law did not now mean they had to retire, maybe it’s time they accepted, say, that they were over the hill, or should make way for a younger person. Performance management meetings, could presumably become more like a scene from The Apprentice, with no fear that evidence of a bullying manner could then be used in a claim.

Protected conversations are the subject of Barber’s most specific criticisms: ‘Allowing conversations that happen at work over difficult issues like retirement or poor performance to take place but not permitting their record to be referred to in the future, should a case ever go to tribunal, is hugely worrying,’ he said. ‘This could simply provide the perfect cover for rogue bosses to bully on a whim without fear of ever being found out.'

Fox is more positive about the significance of the proposal: ‘This could in fact make a big difference as to how parties can speak to one another to seek to resolve matters without having to go through the need for outside mediation, conciliation or even litigation.’ He says the detail will need to be worked through, but notes: ‘The concept of allowing employers and employees to sit down together at an early stage, without fear that anything said may subsequently be used in evidence, must be right, and is only an extension of what most parties would want to happen in any event.’

Without the lawyers

Not for the first time, policy-makers have put their faith in mediation - with a marked preference for any process that removes a claimant employee’s lawyer-representatives from the scene. As Cable put it: ‘We want to reduce the number of tribunals happening in any one year - because we believe the only winners from that are the lawyers.’ Successful claimants seem not to be on the business secretary’s radar here.

So the proposal is that all employment claims will go to Acas for ‘pre-claim conciliation’. Fox says the enhanced role for Acas ‘is to be welcomed’, but that there needs to be clarity around two issues: ‘First, the precise role Acas will play - are they simply going to be informing the parties as to what can happen if claims proceed to the Employment Tribunal, or are they to go further and provide initial advice, in which case problems may arise? The government may want to stay with the line that it will be "information only", but how easy is that going to be in practice?’

Second, there is the question of resources: ‘Acas, just like any other government body, is under great financial pressure. If they are going to have a considerably enhanced role, they are going to need to be adequately resourced. Unfortunately, we have seen no commitment in that respect thus far.’

Into the long grass?

Other sections of Cable’s announcement attracted headlines, but are the subject of reviews, reports and calls for evidence, and will not be part of a rush to reform. Mr Justice Underhill will conduct a ‘root and branch’ review of the rules governing employment tribunals. He should propose a revised procedural code by April 2012. He has been asked to find ways to resolve proceedings ‘otherwise than through judicial determination at hearings’, with an emphasis on speed, efficiency and consistency. Clear rules should help unrepresented parties, BIS has stated.

But Underhill’s brief is otherwise less prescriptive than that for other consultations. His review also has the support of the opposition. As Umunna put it: ‘We have said the employment tribunal process needs reform in the interests of both employers and employees so we welcome the appointment of Mr Justice Underhill to ­examine the tribunal rules of procedure.’ Somehow his reforms are expected to save employers £40m.

BIS is also gathering evidence on the impact of shortening the time period for collective redundancy consultations. The consultation period for collective redundancies may be cut from the current 90-day limit to 60, 45, or even 30 days. But there is a tension here between ministers’ desire to intervene in large headline cases that involve numerous redundancies, and the urge to give businesses more ‘flexibility’.

Following the closure of Cadbury factories after the firm’s sale to Kraft, Cable was among the ministers who supported changes to the laws governing mergers and acquisitions that would allow for intervention by the secretary of state. The fact that proposals consulted on here were not taken forward may be a sign of tension within the coalition on such topics.

Aside from the nuances of Cable’s speech, his announcement was presented to the press and public as a sudden, full-frontal assault on employment rights. And there are points of substance to the concerns of employees and the lawyers who act for them. But sitting behind some headline proposals are an amorphous set of consultations and reviews, the results of which may not be ready for implementation until the economy has resumed stronger growth. It is uncertain whether the backdrop of a stronger economy would remove some of the impetus behind the plans.