As discussed in a previous post, the qualifying period to obtain the right not be be unfairly dismissed has been extended from one to two years as from the 6th April 2012 ( The Unfair dismissal and statement of written reasons for dismissal (variation of the qualifying period) order 2012). This will only apply to those persons who were employed on or after the 6th April 2012. In other words, those persons who were employed prior to this date will still only have to work a continuous year for the same employer before they acquire a right not to be unfairly dismissed in terms of the Employment Rights Act and those who commence their employment on or after the 6th April 2012 will have to work a continuous period of two years before acquiring this right.
What does this mean for employers and employees? In essence it means that an employee who is dismissed will have to have worked for two or more continuous years for that employer before they can challenge the fairness of the dismissal before an employment tribunal. There is an exemption to this. The qualifying period does not apply to automatically unfair reasons for dismissal and unfair discrimination claims. The right to challenge a dismissal for automatically unfair reasons applies from day one of employment. For employers this means that they do not have to have a potentially fair reason for dismissal and do not have to follow a fair procedure in terminating the contracts of those employees who have been employed for less than two years. A word of caution. Some employers have incorporated their disciplinary and grievance procedures as express terms of the employment contract. In these cases, if one simply dismisses without following prescribed procedures may face a wrongful dismissal claim or a claim for damages as a result of a breach of contract.
The raison de être for extension is that it will encourage employers to employ more people and reduce the costs of terminating employees thereby reducing unemployment and encouraging growth (see the debate in The House of Commons and the The House of Lords ). The veracity of these reasons has been seriously been called into question by a number of commentators, political parties and interest groups. In essence there seems to be no evidence establishing a causal link or even a positive correlation between the extension of this qualifying period and unemployment. Firstly a survey conducted by the Institute of Charted Accountants in England and Wales (see ICAEW Survey14, Feb 2012) revealed that only 40 percent of those businesses surveyed said that extending the qualifying period would encourage them to hire more employees and more than fifty percent said that that they would employ people if the business required it irrespective of the qualifying period. The orthodox economic model holds that Employment Protection Legislation (EPL) does affect the efficiency of a business. However since the advocacy of this model by the IMF in the mid ninety's, this model has come under increasing scrutiny and to put it simply, the effect of EPL on macro economic indicators such as unemployment and growth cannot be established with certainty with respect to empirical data ( See LABOUR MARKET INSTITUTIONS WITHOUT BLINDERS: THE DEBATE OVER FLEXIBILITY AND LABOUR MARKET PERFORMANCE by Richard B. Freeman for a useful summary of this debate). Some economists have argued that having tighter regulation of the employer's right to terminate the contract of employment may have a beneficial economic effect. Tighter regulation means that an employer will more closely scrutinise candidates for employment and are less likely to dismiss, thus resulting in lower rate of turnover and better matches. Some commentators have argued that if employers rationally look at the statistics, they will see that there should not be fearful of employing because of potential tribunal claims. Ewing and Hendy QC ( see Industrial Law Journal vol 41 March 2012 page 115), analysing tribunal statistics between 2009 and 2011, argue that 73 percent of claims made by employees in respect of unfair dismissal are unsuccessful. In the last year, only 9,000 cases of 49, 600 claims made reached a full hearing at tribunal level. In addition of those claims which were successful, the average compensation award made was a "princely" 4, 500 pounds. As these figures suggest, employers fears, to the extent that there are any, are unjustified. Ewing and Hendy suggest that it may be much more beneficial to educate employers as to the realities of situation rather than fiddle with the qualifying period.
There can be no doubt that there is a cost impact as a result of the unfair dismissal provisions such as time spent holding hearings and as a result of tribunal claims. However it is highly doubtful that by extending the period from one to two years will have a significant cost impact such as to be a meaningful factor in retarding growth. These costs are also offset by the impact of dismissal regulation has on labour turnover and the benefits of better internal dispute resolution procedures. Removing the right to challenge the fairness of their dismissals from three million employees with a disproportionate effect on young workers and women does not seem to have adequate justification.
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