Leaked report exposes plans to further dilute unfair dismissal laws

Last months highly publicised ‘Beecroft’ report detailed the government’s plans to make key changes to employment law by increasing the qualifying period before unfair dismissal claims can be brought against employers. A leaked draft report now appears to suggest further changes may be imminent. 

Venture capitalist Adrian Beecroft’s exposed report proposes abolition of unfair dismissal rights when a dismissal is connected to capability and performance. This is argued to be a further attempt by the government to dilute employment laws which were established some 40 years ago using the current economic climate as a smoke screen as justification for the reform. 

Current law relating to performance capability dismissal

Under Section 98(3) of the Employment Rights Act 1996, issues concerning capability and qualifications of employees to perform work of a kind, is a potentially fair reason for dismissal. 

Where inadequacies are considered so extreme, or issues are irredeemable and warnings and or opportunities to improve are of no benefit, employers can currently dismiss an employee ‘fairly’.  Procedures do need to be followed to implement the dismissal fairly, but employers are required to take heed of the general rule that a warning and time for improvement should be given to the employee in question. 

Employers are required to follow set procedures which have been previously agreed and/or notified to their employees.  In many cases these procedures are set out in employee contracts of employment or staff handbooks. 

Where an employee falls short of performance and/or capabilities required of them, employers should:

i. Invite the employee to a meeting giving prior written notice outlining the issues

ii. Allow the employee to be accompanied by a colleague or trade union representative

At the meeting the employee must be informed of the following:

i. How they fall short of the required standards for the particular job/role in detail

ii. The timeframe they will be given to improve their performance (e.g. six months)

iii. That in the event of failing to improve their performance informed they will receive a written warning

iv. That in the event of continued failure to improve within a further reasonable time dismissal may occur

The above should be confirmed in writing after the meeting.

During the ’reasonable period’, if the employee fails to improve they should be sent a further letter by the employer setting out the respects in which they have failed to improve. The employee should then be invited to a further meeting to explain the failure.  At this meeting, the employer should set out the failings and provide the employee an opportunity to explain. In the event of no satisfactory mitigating circumstances, the employee should be informed:

i. That they have further time to improve (e.g. 3 months)

ii. That continued failure to improve will result in dismissal

The courts may also look at whether or not an employer has offered training to assist performance, and/or whether or not other work is available which may be more suitable for that employee. This varies according to the circumstances however it is best to give formal warnings in cases of incapability, irrespective of the seniority of the employee. There are also a whole myriad of issues that the courts consider such as qualifications, and/or capability issues linked to ill health and employers are advised to always seek specialist legal advice. 

The current law allows employers to dismiss fairly if capability/performance is the real issue. Although many are seeking to suggest that in this current economic climate existing employment laws are overly onerous and hindering economic recovery, many critics disagree.  The report suggests that if incapable people are dismissed, they could be replaced with those who are more capable and therefore promote economic growth.

There appears to be a view that under current legislation, incapable and/or underperforming workers are able to remain in employment “under the radar” and without being of any ‘value add’ to the business as a whole.  It is difficult to “sack” these employees and often employers are scared of costly employment tribunal claims.  Mr Beecroft suggests that the current capability and performance procedures are lengthy and complex and therefore hard for employers to implement and/or justify any dismissal.  He has been quoted as saying it is “too easy for employees to claim they have been unfairly treated and gain significant compensation”.

There is furore within the coalition government with the Liberal Democrats expressing they consider it would be madness to scrap capability and performance as a potentially fair reason for dismissal.  Trade Unions have also expressed their distaste of reform to the current law. Many critics have suggested that the report is a knee jerk reaction to the current economic downturn and that there is no reliable evidence to suggest dilution of current laws would assist in rebuilding economic growth. As a draft report that was not meant to be seen by the public, what the government intends to do with employment laws in the future remains as clear as mud.

If you are an employer or employee and require advice on a performance and or capability related issue in the workplace, please contact Kaajal Nathwani on 0208 363 4444 or alternatively on kaajal.nathwani@curwens.co.uk. 

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