The terrible impact of the current unfair dismissal rules

03 Nov 2011

A Downing Street report has suggested that the current unfair dismissal laws are stifling growth by preventing employers from removing under-performing staff and replacing them with superior staff through fear of unfair dismissal claims.  In particular, the report focuses on the current capability procedures, suggesting that they are arduous and allow employees to work below their true level of capability and "coast along".

The report suggests that, in order to resolve this problem, the unfair dismissal process could simply say that if discrimination was not involved, an employer could dismiss the employee, at any time, without giving a reason and would only have to pay the employee his or her contractual notice period and the termination payment that they would have received had their role been made redundant. 

The employee would still be given the chance to argue their case and to suggest, but not demand, that they are given time to improve or be transferred to a less demanding and, potentially, lower paid role.

It is important to remember that the capability procedure is not designed to dismiss an employee; its purpose is to enable an employee to reach the standards of performance expected by their employer.  This proposal appears to entirely miss this point.

In addition, if the right to claim unfair dismissal is removed unless there is a discriminatory reason for the dismissal, the inevitable result is that more employees will bring unfounded claims for discrimination on the grounds of their sex, age, disability, sexual orientation, race or religion.  This will have the unfortunate side effect of making Tribunal claims more complicated and more expensive to defend for employers.

It is likely that such a radical reform to the unfair dismissal rules will be rejected by the coalition Government; however, it does provide an indication of the Government's desire to reduce employment regulation.