Business Secretary Vince Cable has recently announced the coalition government’s proposals for employment law reform.  The government hopes that the reform will lead to economic growth by encouraging employers to hire new employees and make it easier and quicker to settle disputes by simplifying employment law.  
 

This move will inevitably be seen by many as an erosion of employees’ rights in the  UK .  However, in reality as the average award for unfair dismissal is far below the cap, the proposed cut on the cap is unlikely to have a real effect on most claimants, save for those who are on a high income and those who are likely to be out of a job for a lengthy period of time.  The slash on the cap on unfair dismissal compensation might help to remove some of the claimant’s unrealistic perceptions of the strength and value of their claim and this may perhaps help in reaching a quick settlement for the parties. 

The government hopes that ‘exit deals’ could be reached in unfair dismissal cases through negotiation between the parties.  Instead of following all the rigid procedures, employers will be allowed to offer an ‘exit deal’ to an underperforming employee.  However, the employer must not mishandle an offer by putting its employees under improper pressure to accept it or make any discriminatory comments.  There will be new rules and a code of practice to govern the new regime.  It is difficult to see how more new rules and guidance would simplify matters.  It will certainly lead to more litigation, contrary to the government’s intention of helping the parties to reach a quick settlement and to avoid lengthy litigation. 

In addition, many suspect that the removal of the cap on unfair dismissal compensation would not help in achieving a reduction in employment claims, as a disgruntled employee could simply pursue a discrimination or whistle-blowing claim instead.  Given that in April 2012, we saw an increase in the qualifying period for making a claim for unfair dismissal from one to two years for those who started work after 6 April 2012, we may see an increase of discrimination or whistle-blowing claims, as these claims impose no qualifying period for the claimant.
 

This article is written by Lester Kan, Senior Partner of Lester Dominic Solicitors