Essay: The complexities of employment law

To illustrate how complex and burdensome Employment Law can be, take for example an employer seeking to quickly terminate an employee’s contract. There are two general approaches the employer may take. The first which may be deemed high risk is to simply give the employee notice under their contract or offer payment in lieu of notice, if the contract allows for such payment. The risk involved here is that the employee may commence a claim for unfair dismissal in the Employment Tribunal.
The second, less risky but more usual way would be to follow, to the letter, the employer’s disciplinary procedure which if unavailable, defaults to the ACAS Code of Practice. However, any deviation from the internal or ACAS Code of Practice disciplinary procedure, could make a dismissal unfair and also result in an increase in possible compensation for the affected employee.
Clearly, for the average employer who is likely to be a small business owner, this is an example of one of the many issues relating to Employment Law that the employee is unlikely equipped to deal with. The question is, has Employment Law become too complicated, particularly with regards to hiring and firing employees such that it acts as a deterrent for higher employment levels which are essential for a healthy economy? This paper will attempt to answer this question with reference to current English Law.
Main Body
The Employment Rights Act 1996 seems to try to strike a balance with the rights and responsibilities it assigns both parties. For example, an employer can be held liable for unfairly dismissing an employee, but the Act also provides that redundancy or “some other substantial reason” justifying dismissal are among the grounds in which dismissal can be deemed fair. Ultimately, the perception of whether the law is biased appears to be based on the viewpoints of relevant stakeholders.
In today’s political climate, many perceive that employers bear most of the burdens of the law; one being the rigidity of contractual employment periods. In Berg v Blackburn Rovers Football Club & Athletic plc, Mr Berg was employed as Blackburn Rovers’ club manager, under a fixed-term contract of slightly less than three years. The contract required Blackburn Rovers to pay Mr Berg the salary that he would have received for the remainder of the fixed-period, if they were to terminate his contract early. When the club actually did, Mr Berg claimed the £2.25 million for the unexpired period of his contract. This case illustrates that employers are bound to pay the settlement if they are tied to contracts. Practically, economic environments frequently change and the contractual inability to adjust to dynamic staffing requirements are likely an added business risk to employers, and an impediment to economic growth.
In the article ‘George Osborne revives divisive plan to let bosses \’hire and fire at will\’’ by The Independent UK, Andrew Grice sourced that in many cases employers are terrified they are stuck in a difficult situation with an employee and can\’t do anything about it, but this perception has to be tackled not by means of stripping away employment rights. Bearing in mind that employers already face additional employee costs in the form of often excessive National Insurance Contributions, the rigidity of hiring and firing practices enshrined in law and statute may represent a clear disincentive to hire more staff in order to grow businesses. For the employer, this reduces its profitability and competitiveness, especially if employees are bringing claims against them from every corner. In response to this the government implemented the zero-hours contract, providing more flexibility to hire and fire at will, and subsequently boosting profits and competition.
Section 27A(1) of the Employment Rights Act 1996 defines zero hours contracts as a contract of employment or worker’s contract under which the worker’s undertaking to perform work is conditional on the employer making work available, but where there is no certainty that any work will be offered. This could however be easily avoided by employer’s guaranteeing workers very small number of hours, thus taking the contract out of the ‘zero hours’ definition.
The zero-hours contract can be said to benefit the employers quite a bit in a sense that employers are able to maximise the flexibility of their workforce, as part of a broader strategy to keep wage costs down, to evade employment law obligations and to reduce costs by laying-off staff at short notice whilst avoiding redundancy payments.
Since their introduction, zero hour contracts have been heavily criticised for being inequitable. Dr Ernestine Ndzi in “Directors\’ duties and employee interest: the case of zero hour contracts” viewed that the level of unemployment in the UK makes it easier for employers to hire as many as they desire on zero hour contracts, as people generally do not want to be unemployed. It does not just make it easier for employers to hire, but also makes it easier for employers to fire the workers as the employer simply needs to stop offering him work. However, all the financial and security risks are transferred to the workers. It is highly questionable that this is good for the economy as it widens the income gap between labour (employees) and the providers of capital (employers). Trades Union Congress (TUC) in ‘Ending the abuse of zero-hours contracts’ held that the evidence gathered reveals that zero-hours contracts are increasingly a conduit for the exploitation of working people.
Generally, most employers are (rightly) nervous about dismissing an employee because of the risks of an employment tribunal claim. In 2013, Grant Shapps (then Conservative chairman) said that employers have to come up with “disingenuous reasons” to fire staff because employment laws are stacked in favour of employees. He also said that the priority for a Conservative Government would be to make it even easier to sack employees. Tar Tumber (Workplace Law’s HR Consultants) commented in respond to Mr Shapps statements regarding the possibility of it becoming easier for employers to sack their staff, stating that natural justice will disappear, and that employers should at least do so in a way that is appropriate, legal and fair. It would appear that the previous Conservative government was determined to make hiring and firing a whole lot easier. It was even recommended that the law of unfair dismissal should be abolished altogether, although this proposal was rejected.
Nevertheless, a number of changes in the law have occurred over the past several years. Firstly, the qualifying period for unfair dismissal increased to two years as found in Employment Rights Act 1996. In order to have the right to claim unfair dismissal, an employee needs to be employed for a minimum of two years, meaning it is relatively safe to dismiss someone who has been employed for less than two years. Besides that, the introduction of tribunal fees. Changes took place July 2013 when claims for unfair dismissal had a start-off fee of £250 and a further £950 to go to a hearing. Finally, ACAS Compulsory Conciliation effective May 2014 requiring employees to go through compulsory ACAS conciliation before they can launch a tribunal claim.
All the above changes are basically intended to resolve disputes without involving employment tribunals. At the same time, these changes in the law are reducing the prospects of employers having to fight a tribunal claim, in addition to making it easier in some ways for employers to hire and fire employees. It is to be noted however, the English employment law pendulum tends to swing in favour of employees and then back to employers, depending on who is in government. Evidently, things are currently looking up for employers.
Influential venture capitalist Adrian Beecroft, holds the view that businesses must be left to manage their own affairs in a way that allows them to be efficient in a more competitive domestic and global market. He suggests that excessive regulation is the cause of high unemployment. This may strike some commentators as perverse because removing underperforming employees will undoubtedly increase unemployment in the short term, despite the report making assertions to the contrary. Basically, this is so that employers will be able to replace incompetent employees with more competent ones. In an attempt to strike a balanced view, Beecroft acknowledges that the downside of the proposal is that people may be dismissed simply because their employer does not like them, but then the employer will pay a higher cost of the redundancy-type payment in such circumstances.
Additionally, an employer can be held liable for acting discriminatorily in the process of firing an employee. For instance, in the event the employer would need to terminate certain staff, and chooses to let go of the more qualified pregnant female employee (as the employer is thinking about the statutory maternity leave that he would have to give her as well as maternity pay) instead of the male employee, this would amount to sex discrimination on the part of the employer. By virtue of Section 13 of the Equality Act 2010, an employer discriminates against an employee if, because of a protected characteristic, the employer treats the employee less favourably than how the employer would treat other employees. The Daily Mail UK has reported that one in three bosses would rather hire a man in his 20s or 30s than a woman of the same age because of maternity leave fears.
The 2010 Act goes to show that it is not easy for employers to dismiss employees by means of discrimination (inequality). Per the UK Government report The Equality Strategy – Building a Fairer Britain, ‘equality is not an add-on, but an integral part of this government’s commitment to build a stronger economy and fairer society.’
Conclusion
Importantly, Britain’s high youth unemployment has been at the foremost of most economic and political agendas in recent years. The Beecroft Report came about to stimulate economic groups and encourage employers to recruit. It is definite that unfair dismissal claims from employees are a hassle and one that is costly employers. Arguably, the report held the introduction of ‘no-fault dismissals’ would allow employers to dismiss underperforming staff, without the risk of their employees bringing claims for unfair dismissal. Chris Monaghan in “The Beecroft Report, the Enterprise and Regulatory Reform Act 2013, the employee share scheme and beyond: are recent proposals a controversial panacea or an erosion of employees\’ rights?” held that “according to the Beecroft Report, the introduction of this recommendation would \”produce an instant improvement in a significant part of the national workforce\”, encourage employers to recruit and make it easier to dismiss employers who work in the public sector.”
The Beecroft Report was published and buried by the coalition government four years ago, but it’s implications are uncertain in a post-Brexit economic climate. Currently, the right to equal pay, maternity and paternity leave, paid holidays is upheld by EU law. While these are also covered by the Employment Act 1996, when the UK leaves the EU, the Conservative Party would have a blueprint for scrapping many of these rights. There has been much talk on the risk to workers’ rights and fears that many such rights could be taken away. Not forgetting, employers may finally have the right to dismiss employees based on ‘no-fault’. The uncertainly of these legal protections is bound to have repercussions in the labour market.