Changes to Unfair Dismissal in the UK

2013 will see several key changes made to the rules on unfair dismissal and the way in which cases are to be handled by tribunals. Perhaps the most significant of these changes is the decision by the government to charge a tribunal fee for the first time, a move that relates to every tribunal case, not just to unfair dismissal. The fee is designed to reduce the number of tribunal claims being made (by 2,000 per year if the government’s estimates are to be believed) although it somewhat flies in the face of the initial tribunal concept, which was to offer employees informal and accessible justice. It is thought that fees charged will be £250 per application, with an additional £1,000 to be payable if a hearing is granted. Although there is to be some degree of assistance for financially disadvantaged claimants, the fee paid is only refunded if the claim is successful – if the claimant loses then the fee is lost.

Whilst it was announced last year, the change to the unfair dismissal qualifying period – which was increased from one to two years for all employees employed on or after 6 April 2012 – will really begin to be felt in 2013. This is because those employed on or after 6 April 2012 would not even have yet achieved the year’s service that would allow them to claim under the old rules last year. In 2013, the practical effect will be that claims that could previously have been made after a year under the old rules will have to wait another year, which should result in a lowering of claim figures.

Another significant change to unfair dismissal rules is that a compensation cap is to be introduced for successful claims – by a slightly round about method. Whilst the upper limit on unfair dismissal compensation will increase to £74,200 on 1 February 2013, clause 13 of the Enterprise and Regulatory Reform Bill allows compensation to be varied, including reducing any award to either a year’s median earnings (approximately £28,000) or an employee’s actual earnings, whichever is the lower.

In another bid to speed up the settlement of claims for unfair dismissal, the idea of a ‘protected conversation’ has been initiated. This essentially introduces the concept of a conversation between employer and employee in a situation where the employee relationship is not proceeding satisfactorily. Where a settlement solution is to be discussed, the conversation can be opened, no matter which party is proposing the settlement, and will not be considered as admissible evidence in a consequent tribunal claim for unfair dismissal (although it would be for another claim process, such as discrimination).

Finally, the government has proposed to give employees and employers the chance to rid themselves of unfair dismissal entirely in an employee relationship thanks to the concept of the ‘employee owner.’ From April 2013, this idea will give SMEs the opportunity to offer employees the chance to forgo some of their employment rights, including unfair dismissal, in return for a share in the company. This is particularly aimed at SMEs struggling with the management of employee rights and look to relieve themselves of some of this burden.

Whilst it is hoped that introducing a tribunal fee for every case will result in the weeding out of frivolous claims (rather than preventing access to justice), other of these changes, such as the increase in the qualifying period for unfair dismissal and the introduction of the compensation cap, may have a knock on negative effect. For example, both the cap and the qualifying period risk employees seeking other forms of redress, for example through another method of claim that does not require a minimum period of service or have the same limits on the amount of compensation available – such as discrimination.