Wednesday 13th June 2012 at 6:00am
Beecroft: how an ill-spent £150k is going to make life worse for every worker
The Enterprise and Regulatory Reform Bill, which will in due course become an unfortunately-titled Enterprise and Regulatory Reform Act (“Erra”) has now had its second reading in Parliament. The pre-publicity in the Sun and Guardian, among others, make it clear that the Coalition sees its central contribution as “protected conversations”, i.e. a new power under which employers could offer to settle unfair dismissal claims with a worker before they were sacked, and these conversations would be “protected” (i.e. a Tribunal could not be told what was said in them).
Employment Relations Minister Norman Lamb is quoted on the Cabinet Office website justifying the measure:
“There are inevitably occasions when the employment relationship doesn’t work out. Employers have to feel confident in dealing with situations such as where an employee isn’t pulling their weight or where someone is unreliable or even guilty of misconduct. In these instances it is sometimes in the best interests of both employee and employer to end the relationship speedily by reaching a settlement. An employee leaving by agreement can do so with their dignity intact. The employer secures peace of mind knowing that they will not face expensive tribunal proceedings”.
You will notice the circumstances where this is supposed to help: two of the three examples (“isn’t pulling their weight” … “unreliable”) given by Lamb, are what employment lawyers would deem “capability” dismissals. In practice, these are usually dismissals involving workers who are off on long term sick leave, although they can also involve cases where a worker needs training on appointment or on promotion (and training is withheld) or where a worker lacks the skills on appointment, and it is simply unclear whether they will be able to match up to the new role in time. When these cases make it to the Tribunal the central question is whether the worker was given enough time, or to put it the other way around, where the employer rushed unduly before dismissing.
The justification of protected conversations is that where the employer uses them to settle a case, both sides are content and a costly legal battle is avoided. The problem, obviously, is what happens when the employer tried a “protected conversation” and the case does not settle.
The “protected conversation” is inevitably relevant to whether a decision to dismiss was taken too soon. Just to give an example that will be familiar to all employment lawyers: a worker has an accident at work. Their prospects of returning are initially unclear but it becomes apparent that they will not be able to return to their old duties. After three months the employer makes a referral to Occupational Health and after six months the worker is dismissed. On these facts, pretty clearly, the worker has a potential (albeit not necessarily strong) claim for unfair dismissal.
Now add in the protected conversation to the above facts: if it took place the day after the accident, then (almost irrespective of what was said) it would indicate that the employer had immediately, and prematurely, given up on the possibility of the worker returning. Or, if the conversation took place after 3 months, but the tone was bullying and hectoring; or if the employer said clearly, we like you as a worker, but we’re simply not prepared to pay the costs that it might involve to keep you on, that too would be intensely relevant to the fairness of a dismissal.
While “protected conversations” are meant to make life easier for employers and harder for workers, they conflict with the fair hearing principles enshrined in the common law, article 6, and the Tribunal’s overriding objective. Just saying “these conversations are protected” won’t keep them out of the Tribunal system, but will lead inevitably to satellite litigation about when they can – or must – be disclosed.
The Coalition has already indicated a certain recognition of the problems by saying protected conversations will not apply to discriminatory dismissals.
So, given that “protected conversations” are a bad idea, why are they being introduced? The short answer is that they date back to the Beecroft report.
But why was Adrian Beecroft so keen on tackling capability dismissals in particular? The Daily Telegraph which has been reporting Beecroft assiduously has interviewed the venture capitalist and asked him why he was so keen on “reforming” employment law.
It is a fair question – Beecroft is an owner of a series of large businesses include the online pawnbroker Wonga.com, and a generous donor to the Conservative Party but has no previous history of interest in employment law.
Beecroft answers by explaining that during the course of his life as an employer he once had to deal with a single personnel manager who knew lots of law but had poor interpersonal skills. The manager was dismissed and sued for ordinary unfair dismissal and sex discrimination (the advert stressed that his replacement should have strong interpersonal skills, which the manager interpreted as an implied desire to recruit a woman to the new post). Beecroft settled the case out of court for £150k.
The following thoughts may have occurred to readers of this blog:
i) The claim in question was a discrimination claim; but the government is saying that protected conversations will not apply to discrimination claims. So to protect against one “evil”, employers are being giving a remedy which would not apply if the same case was to happen again
ii) The manager’s sex discrimination claims sounds tenuous in the extreme
iii) The award of £150,000 is 30 times more than the average award for unfair dismissal; some of this will be because the manager was well paid, but given that the cap for ordinary unfair dismissal would probably have been c£60-65k at the time of the dismissal, it looks like Beecroft settled the case for at least twice what it could possibly have been worth.
iv) Who was advising Beecroft?
v) If one worker succeeded in negotiating a very generous departure package good luck to them, but this case was in almost every important respect unlike 99% of Tribunal claims. Why should millions of workers have to suffer because of Beecroft’s failure to robustly defend a single claim?
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Friday 25th May 2012 at 6:00am
More grisly murders; journalist gets employment law wrong (again)
While journalists at the Daily Telegraph deserve credit for having obtained a copy of the full Beecroft Report, they have done us a considerable disservice by misrepresenting the policy debates, no doubt with the encouragement of some ministerial press officers eager to protect their minister’s reputation.
Above their article in Monday’s online edition revealing the contents of the report, the Telegraph’s journalists wrote “Adrian Beecroft’s report lays bare the breadth of the revolution in employment law which was being considered by close aides to David Cameron last Autumn – and the degree to which the Liberal Democrats in the Coalition ensured that only a pale shadow of his proposals never (sic) saw the light of day” (emphasis added).
Rather than take at face value claims by Lib Dem ministers to have ensured that only “a pale shadow” of Beecroft is being implemented, journalists should have gone further and checked what proposals the Coalition is actually making for employment law.
Had they done so, anyone following the police debates, would have pointed out to them that almost all the areas for “reform” identified by Beecroft are subject to either public consultation or proposed changes.
In particular, while Vince Cable has been all over the press saying that his department will drop Mr Beecroft’s proposals for Compensated No Fault Dismissals (CNFD), the policy remains subject to a public call for evidence which has not closed.
Moreover, a careful comparison of Mr Beecroft’s proposals and Mr Cable’s shows that while the former’s proposals would represent a significant tipping of employment law in favour of employers, Mr Cable’s actually go further.
• Beecroft says CNFD should be used only for capability dismissals, Cable’s proposals do nothing to restrict the set of dismissals coming within CNFD (making it potentially available to employers as a cheap alternative to redundancy).
• Beecroft says CNFD dismissals should attract the statutory redundancy payments, Cable asks whether there should be a cap to CNFD awards, putting them below redundancy payments.
Since Monday, we have had further clarity as to the government’s proposals for Employment Law reform. In particular part 2 of a draft Enterprise and Regulatory Reform Bill has now been published, no doubt to be known in future as “ERR” or “the Beecroft Bill”.
While the final version of the Bill may be very different from this draft (which makes no mention, for example, of the Coalition’s signature plans to introduce punitive fees for Tribunal Claimants), revealingly the Bill outlines one significant change (which was not in any versions of Beecroft, not has it been subject to public consultation in any form). This is to give Ministers the power in future, with no effective parliamentary scrutiny, to make Regulations limiting the compensatory award for unfair dismissals to a maximum of between 1 and 3 times the median wage (i.e. c£26,000-£78,000 in today’s money).
The maximum compensatory award is presently £72,300. No one should have any doubt that if this proposal is introduced, ministers will reduce this to the lowest amount in their power, namely c£26,000.
Beecroft, for all his faults, had a very different proposal. He suggested that the compensatory award for unfair dismissal should be set at a fixed amount of (say) 9 months wages. He recognised that this might cause injustice in some cases (if workers actually took longer than 9 months to find a job), but would have an advantage in that parties would know the value of a claim, and would – on both sides – find it much easier to settle.
Ironically, given that the general tenor of the Beecroft proposals was to benefit capital at the expense of labout, if this was introduced, this part of the Beecroft proposals would benefit many workers. As I have explained elsewhere, the median award for unfair dismissal (including both the basic and the compensatory award) is presently £4,591, or just over 2 months wages. Beecroft’s proposal would have the effect that the average unfair dismissal claims would attract around 4-5 times as much compensation as they do now.
Cable’s counter-proposal, unlike Beecroft’s offers “no minimum floor” for workers.
Rather, all it does, is reduce the value of workers’ claims.
So, when the Telegraph’s journalists announced that Liberal Democrats had removed all but a shadow of the Beecroft proposals, what they should properly have gone on to explain, is that the Lib Dems had done so only by pushing an already nasty package of reforms very dramatically further in the employer’s favour.
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Tuesday 22nd May 2012 at 9:34am
The Beecroft Report: A Financier’s Dream
“Reading the details of the Adrian Beecroft Report, which has now been published on the Daily Telegraph’s website, what strikes me is really how few surprises there are. The report anticipates – wholly unsurprisingly – most of the malign ‘reforms’ of employment law on which the government has since been consulting.”
A response to the Beecrfot report; more on the New Left Project website.
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