The Business Secretary, Vince Cable, last week announced further proposals in reforming employment law with a view to boosting growth which have received a mixed reception. To summarise, the proposals are as follows:

  1. Having received evidence from businesses about the idea of “no-fault” dismissal, the government has decided to drop this proposal.
  2. To consider reducing the compensatory award cap that can be awarded on an unfair dismissal claim.

This will either be reduced to the equivalent of a year’s salary or an amount that is between 1 to 3 times the average annual earnings. The consultation for this closes on 23 November 2012.

Currently the compensatory award cap stands at £72,300, although it is extremely rare for an award of this amount to be made. It is difficult to see how lowering the cap will boost flexibility or encourage confidence in the workplace. Whilst employers will still be required to act reasonably in dismissing, reducing the cap may not dissuade employers from behaving unconscionably as the financial risk would be somewhat reduced, especially if there is a commercial decision at play.  One also has to ask whether it is fair to reduce the cap if employers have behaved badly to an employee; surely they have the right to be adequately compensated?

The proposal does not address the main problem which is employees bringing claims for little or no good reason, although it is hoped that the introduction of issue fees will address this problem somewhat.

Of course, we should not forget discrimination claims have uncapped awards and so there is a chance more claimants will claim discrimination to get around this cap which will bring with it a whole host of other problems.

  1. To encourage the use of settlement agreements.

This is not at all controversial as these agreements are already in existence and are known as compromise agreements. The Consultation has commenced and will close on 23 November 2012. In the Consultation papers, model letters and model settlement agreements are included.

  1. The government also published their response to the calls for evidence on the effectiveness of Transfer of Undertakings (Protection of Employment) Regulations 2006.

The government will now consider various ideas including:

  1. whether to repeal the law on service provision change;
  2. whether liability for employees should be held jointly between the transferee and transferor or whether it should pass entirely to the transferee;
  3. whether employee liability information should be provided earlier to the transferee; and
  4. whether an amendment to the TUPE rules should be made so that a change of location of the workplace would constitute an economic, technical or organisation reason.

Watch this space to see what the Government will come up with as a solution. Any one of the above options could have drastic implications for employers.

The aim of these reforms is to reduce the ‘red tape’ surrounding employment law by streamlining the process of ending an employee/ employer relationship so that both parties can move on quickly. This is turn is hoped to boost flexibility and confidence in the labour market. One cannot see how effective such reforms will be but there are serious doubts that the above reforms will do what is expected of them, they do not seem to go far enough or alternatively fail to deal with the heart of the problem. Will it really streamline the process or will it just create various other issues for employers and employees to deal with.