Not enough, Mr Cable

Business Secretary Vince Cable is proposing what the Financial Times calls “an employer-friendly shake-up of Employment Tribunals”. Hmm.

The proposals include an extension from one to two years as the minimum period before an unfair dismissal claim can be submitted; the introduction of a modest fee, repayable if the claim succeeds, for those who wish to take out a tribunal claim; a requirement for claims to be submitted to ACAS for conciliation prior to going to the tribunal system; and procedural reforms such as allowing employment judges to sit alone (without “lay” members) for a wider range of jurisdictions.

The two-year minimum before employment protection kicks in is a good idea, but is unlikely to have much impact in the short run as most claims are made by people who have been employed for longer than this. It may encourage more people to try to link unfair dismissal with a claim of discrimination of some sort – and there are very few employees who are not in a “protected group” of one kind or another (gender, age, religion, sexual orientation, disability etc). All such  claims are feasible from day one  of employment – indeed before joining, as unfairness in recruitment is also a ground for a claim.

And there is no upper limit on compensation for discrimination. A change to this aspect of the law would really be a shake-up, but there is no sign of such an idea in Mr Cable’s consultation document.

The proposal to introduce a fee may have a marginal deterrent effect, but the levels suggested so far – from £50 to £500 – are not likely to have much impact. Many claims are backed by unions, quangos or charities in any case.

Moreover, it appears from the consultation document that this is a sort of user charge, comparable to that in other areas of litigation, and that employers may also have to pay. Not very employer-friendly after all, then – and the consultation document also proposes a new system of fines on employers who are found guilty of a breach of employment law, in addition to the compensation they already have to pay successful claimants. No mention of this in the press coverage.

The requirement to submit claims to ACAS first sounds sensible, but is unlikely to produce outcomes much different from the current system, where ACAS has a duty to offer conciliation to all those submitting tribunal claims. Very many claims are already conciliated at this stage. The new proposal may increase these numbers a little, though whether this is necessarily a good thing isn’t clear: many employers settle at this stage to avoid further cost, rather than because they have accepted that they were in the wrong. Note however  that ACAS will have to do this extra work with no extra funding, so it is reasonable to predict growing backlogs in the system.

As for procedural reforms, we have already had a number of these over the last decade, but numbers seeking tribunal redress (236,000 accepted in the last year) continue to grow.

So my first reaction to the proposals is that they are gestures rather than a serious attempt to turn back the tide of employment regulation. And they need to be set against Coalition legislation on equality, parental leave and mandatory retirement which can only add to the pressures on the tribunal system – and, more importantly, on employers.

Len Shackleton is an Editorial and Research Fellow at the IEA and Professor of Economics at the University of Buckingham. He was previously Dean of the Royal Docks Business School at the University of East London and prior to that was Dean of the Westminster Business School. He has also taught at Queen Mary, University of London and worked as an economist in the Civil Service. His research interests are primarily in the economics of labour markets. He has worked with many think tanks, most closely with the Institute of Economic Affairs, where he is an Economics Fellow. He edits the journal Economic Affairs, which is co-published by the IEA and the University of Buckingham.

2 thoughts on “Not enough, Mr Cable”

  1. Posted 28/01/2011 at 11:29 | Permalink

    Some of the coverage of this story made me confused as to whether to laugh or cry. As this post shows, it’s a very minor gesture which will have little effect and pales into insignificance when taken against the heavy burden of red tape and regulation which businesses face – and which assists big business at the expense of small. One tiny change and trade unions protest claiming that ‘this will allow employers to sack people at will’. Can you imagine? Employers actually having the ability to employ those they wish to employ and who they believe will be most suited rather than those that government would prefer them to employ? What next? Universities recruiting the most able students? Then a load of employment lawyers had the front to object. Of course they couldn’t possibly have a vested interest in lots of employment tribunals now could they?

  2. Posted 28/01/2011 at 14:23 | Permalink

    It is indeed discouraging that a supposedly radical new government comes up with such a pathetic proposal. If the government had done nothing at all, at least one could have hoped for something worthwhile later. The most rational response to what is on the table would seem to be: “Is that it?”

    What is the problem? Do ministers (and civil servants) not understand how the incentives in the present system work? Do they not appreciate the impact on people thinking of becoming employers? I suspect that many small employers are now reluctant to take on more women employees because of all the potential hassle that employment law threatens.

    At one time socialists seemed to think that central planners could somehow duplicate the results of a free market by ‘playing at shop’. But a game where all the counters have to be returned at bed-time is hardly the same as a genuine market where people can keep any profits and really suffer any losses.

    My impression of the coalition is that, in many areas, they are ‘playing at government’. They seem to want to be able to point to tiny gestures as ‘proof’ that their heart is in the right place. What is needed is for them to engage their brains. They are not fools, but from many of their actions so far, one would never know it.

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