Sam Smith: Five ways of reforming Employment Law

Sam Smith is a former Labour Councillor and Spin-Doctor who subsequently defected to the Conservative Party in disgust at New Labour's illiberal laws. He sometimes assists litigants in person as a McKenzie Friend, charitably, for example in the recent DJ v TCBC case regarding the so-called Deprivation of Liberty Safeguards. He has recently obtained a place on a GDL course.

The recent Beecroft report was a missed opportunity for the Conservative Party. Employment law is crying out for reform but Beecroft's proposals lack balance and contain nothing to sell them to the wider public. Sam Smith puts the case for real, comprehensive and Conservative reform of Employment law.

As a former Labour councillor I am no stranger to employment law. Whilst I have never myself issued proceedings in an Employment Tribunal, I have from time to time assisted and represented those who believe they have been treated unfairly. I feel a need to comment on the recent Beecroft report, which made some good points but sadly missed many critical ones.

Like Labour's nightmarish attempts at Mental Capacity law, which are unpopular with professionals, patients and families alike the Employment tribunal system can lead to unsatisfactory results for both employees and employers. I believe that employment law can and should be radically reformed, but rather than tinkering these reforms need to be a coherent package in the manner of the Jackson reforms of the main civil law system. A number of changes are needed, which work as a whole but some of which might be counterproductive on their own.

Blame, No Blame and References

Beecroft proposes to introduce no-fault dismissal. Despite the Liberal hysteria this is hardly radical. These days the overwhelming majority of employment settlements are 'no-fault'. Show me a compromise agreement and 99 times out of a 100 I will show you the words 'without any admission of liability'. Most cases simply do not go to trial. In the official figures nearly half of all claims are settled or withdrawn. These figures do not include settlements pre-issue of the ET1 . Quiet, private arrangements happen all the time and both parties insist on silence.

The reality is that there is no such thing as a right not to be dismissed. In the real world employers can get rid of anyone for any reason at any time - it is simply that it may cost them some money. The present system is unfair, with deserving cases missing out and all sides having to play damages roulette. Some employees can be fired out of spite and given no references because they have not served for the qualifying period whereas others can obtain thousands in damages after being fairly fired because it is cheaper for employers than fighting.

The difficulty with the Beecroft report is that he misses several tricks. Beecroft misses the point that money is often the least of the reasons employees go to tribunal. Typically the worst thing that an employer does is not terminating the employment but it is the associated allegation of incompetence or misconduct. The employer may withhold a reference from the fired employee or may simply state the allegation when the reference is given. Often litigation is commenced as much to clear an employee's name as to obtain money.

In the United Kingdom there is no statutory right to a reference and employers and employees are in practice free to bargain as they like. Employers are constrained from giving an untrue or unduly harsh reference but they are free to withhold one (with some rare exceptions). On the other hand claimant lawyers can wipe away unfortunate facts from their client's history with a stroke of a pen. One claimant lawyer textbook goes into great detail with an example of a reference for an alcoholic school caretaker who assaulted his headmistress and won his claim on technical grounds. The 'negotiated' reference omits these facts. It is a good book - but are such deals in the public interest? Beecroft completely ignores the topic of references.

One of the most morally pernicious aspects of modern employment law is that equality has been venerated over other aspects of morality. An employer can swear at you, lie about you and mock your family as long as you are the from the same group. You may have a right to sue for personal injury or harassment but no employment protection without two years service. The employee of a different hue next to you can sue.

This unfairness, combined with pragmatism, has led to the wholesale devaluation of equality law and its use for unintended purposes. I believe that complaints of bullying should be protected acts regardless of your 'status' and workplace bullying should be a cause for action in employment law, not just under the Protection from Harassment Act.

Beecroft makes the reasonable argument that the compensation for no-fault dismissal should be the same as for redundancy, suggesting that the amounts for both be slightly increased. However he misses the obvious point that it would be desirable to combine no-fault dismissal and redundancy entirely. In America, such dismissals are called 'termination without cause'. Beecroft proposes that employers should be able to avoid the extra payment by terminating for cause when they can show poor performance or poor conduct.

I agree with Beecroft's proposals for the introduction of no fault dismissal with increased compensation and I agree that the right to claim for 'unfair' dismissal in such cases should be abolished with the exceptions of discrimination, whistleblowing etc. However the deal for employees could be sweetened in several ways at no extra cost. Firstly since it is 'no fault' references should be made mandatory in such cases, and should be required by law not to contain criticisms of the employee nor distinguish between redundancies and other types of dismissal.

I also agree that employers should have the option of terminating for cause and avoiding extra payment. Otherwise employees could abuse the system. However in such a case when the worker's professional reputation is at risk, they should be able to challenge their dismissal from day one. Given the new option of 'no-fault' dismissals the 'qualifying period' should be abolished entirely for cases where the employers choose not to use that option. Vexatious claims can be eliminated by reforming the costs rules.

No Win, No Fee

One of Beecroft's most poorly informed remarks was that employers are threatened by Conditional Fee Arrangements. This is ridiculous. The general rule in Employment Tribunals is that there is no order for costs, as opposed to the main courts where the loser pays. This means that if a claimant wins their lawyers must be paid out of their damages, which is only viable in high value cases such as for city workers.

The poorly paid, poorly educated call centre worker who was sexually harassed then fired without a reference has no chance of obtaining a CFA because the damages from their claim might not cover their legal fees. At the same time a smart well educated city worker can bring a baseless case as a litigant in person and rely on the fact that the employer will have to foot a hefty bill even if successful. In fact according to last year's statistics from the Tribunal service, of those cases not settled, in the overwhelming majority of cases the claimant lost.

If the no-costs rule were replaced with the 'loser pays' rule and mandatory ATE insurance for claimants, many vulnerable people with a decent case could obtain good lawyers under a conditional fee arrangement and would be able to obtain a higher settlement. Those with meritless claims would be deterred by the risk of costs instead of being able to blackmail their employers as at present.

Five Points for Employment Law Reform

1. Create a statutory duty for all employers to give a reference.
2. Merge redundancy into a new class of 'Termination Without Cause' including no fault dismissal. Employees terminated without cause would be entitled to a greater payment than at present, but have no right to claim unfair dismissal except for the usual automatic cases such as discrimination and whistleblowing etc. Such employees would be entitled to a reference without criticism. I suggest that the compensation for a probationary employee should be 1 month's wages and for all other employees the current redundancy payment plus 3 month's wages. In both cases the contractual notice would also be payable in addition.
3. Allow employers to retain the option of terminating employees for cause and without compensation (beyond any contractual notice payment), but abolish the qualifying period to bring a claim entirely so that where an employee's reputation is at risk they are entitled to challenge from day 1.
4. Bring workplace bullying into employment law and make complaining of bullying a protected act subject to the same qualifications as under s27 Equality Act 2010.
5. Abolish the no-costs rule, and introduce the indemnity rule to the Employment Tribunal so the loser pays. Require claimants to be insured against the defendant's costs.