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No-fault dismissal "controversy" is diverting attention from beneficial employment law reform, says EEF

The "controversy" surrounding proposals that could allow small employers to dismiss staff more easily is "distracting attention" from employment law reforms that could be genuinely beneficial to businesses, an influential industry body has warned.07 Jun 2012

In its submission to the Government's call for evidence (46-page / 349KB PDF) on 'compensated no-fault dismissal', which closes on Friday, manufacturers' organisation EEF said that the proposal "commands little support from industry" and would make little or no difference to companies' recruitment plans.

It has instead urged the Government to accelerate some of its other proposals, including reducing the current 90 day consultation period for collective redundancy to 30 days and streamlining the employment tribunal system.

"The Government is right to focus on making our labour market more flexible but the case for no-fault dismissal is far from proven," said its chief executive, Terry Scuoler. "We've found little support from industry for introducing no-fault dismissal, its benefits look pretty limited and we've seen no evidence that it would increase recruitment. The Government has many good ideas on collective redundancy, employment tribunals, TUPE and compromise agreements and it now needs to get on with implementing them before moving any further on no-fault dismissal."

In his Government-commissioned report on employment law reform, published last month after its leak to a national newspaper, venture capitalist Adrian Beecroft proposed that companies with ten staff or fewer be allowed to dismiss staff on payment of a set amount of compensation. Employees dismissed in this way would not be able to bring an employment tribunal claim for unfair dismissal, however would still be able to bring claims where they believed discrimination had taken place or that they had been dismissed for an 'automatically unfair' reason, such as whistleblowing or asserting a statutory right.

Employment law expert Christopher Mordue of Pinsent Masons, the law firm behind Out-Law.com, said at the time that it was "unlikely" that some of the more radical proposals in the report would be followed through on. Business Secretary Vince Cable has spoken out against the introduction of no-fault dismissal, branding the proposal as "nonsense" according to press reports.

However other business groups have been more positive about the proposal, with the British Chambers of Commerce (BCC) saying that it would likely only be used in "extreme cases" due to the cost involved.

Mordue said previously that some of the Government's proposed changes would "solve real problems", particularly for medium and larger-sized businesses.

"For example, reducing the notification period for large-scale redundancy exercises from 90 to 30 days would allow large-scale restructuring to be implemented more quickly and bring UK law into line with EU Directives," he said. "The cost savings for businesses would be dramatic - where 100 redundancies are proposed, employers could save the equivalent of 6,000 days total pay for the employees concerned, a saving that may mean that fewer redundancies are actually needed overall."

The Government is yet to comment on its call for evidence on the current collective redundancy rules, which closed at the end of January.

Simplifications to the Transfer of Undertakings (Protection of Employment) (TUPE) Regulations, which protect the rights of employees when a business is taken over by new owners, would allow harmonisation and reduce costs and administrative complexity by preventing the need to maintain different sets of legacy terms and conditions, Mordue said. EEF called for the rules to be simplified to "allow employers to harmonise terms and conditions of employees" a year after the transfer of the business has taken place.

EEF also called on the Government to "deliver on its commitments" to reduce the number and length of employment tribunals by making greater use of conciliation and requiring claimants to lodge fees ahead of making a claim. The Government should also clarify its plans for a system of shared parental leave and introduce "protected conversations", allowing employers to discuss performance issues and concerns without risking these being used as evidence in a subsequent tribunal claim.

Some of the changes to the Tribunal Service will be introduced by the Enterprise and Regulatory Reform Bill, which is currently before Parliament. A consultation on how best to introduce employment tribunal fees, conducted by the Ministry of Justice (MoJ), closed in March.

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