Greg Wright: Employment law reforms may not untangle the red tape

The world would, it seems, be a simpler and saner place if regulations were kept to a minimum.

It’s hardly surprising that Government plans to shake up Britain’s employment laws have received an enthusiastic response from business. I’ve lost count of the times my ear has been bent over the years by employers who claim that the law is hopelessly skewed in favour of the employee.

It’s harder than ever, according to some spectators, to sack a slacker, so anything Business Secretary Vince Cable can do to create a less rigid employment law system is to be welcomed.

Well, perhaps the Government’s five-year review of employment law deserves a dash of cool analysis.

The Government wants to change the law in order to boost economic confidence, and encourage bosses to hire people.

As Kenton Robbins, the regional director of the Institute of Directors, observed: “The planned changes to red tape will encourage more employers to have confidence in taking extra staff on. The Government has to be admired for trying to change the level of red tape that seriously affects employment in the region.”

One person well-placed to give an even-handed analysis of the Government plans is Victoria Notman, of Raworths solicitors in Harrogate, who has acted for a number of blue chip clients.

She questions whether the Government’s proposed changes to employment law will actually result in a reduction in red tape. According to Ms Notman, under the Government plans, old-styles compromise agreements, will be replaced with “settlement agreements”. Compromise agreements draw a line under an employee’s departure and protect an employer from future claims.

Ms Notman notes: “The requirement for employees to get independent legal advice will be retained under settlement agreements. This begs the question of whether there will be a cost-saving for businesses at all, or whether we’re simply talking terminology?”

Most employers have welcomed another element of the proposals, which will reduce the cap on the compensatory award for unfair dismissal.

“The current maximum award of £72,300 will go down but by how much nobody knows,” said Ms Notman. “A lower cap won’t make it any easier to dismiss but it will make it cheaper where an employer gets it wrong. Nor will a lower cap prevent vexatious and unreasonable claims burdening employers.”

Controversially, the Government plans to bring in a charging structure for bringing claims to tribunal – for example, basic claims will cost £160 to issue and a further £230 to take to a hearing.

Paul Scholey, of trade union law firm Morrish Solicitors, believes workers who have been mistreated at work will be denied justice.

He told me: “The issue fee will be payable to start the case. Unless you can foot the bill, or are eligible for some form of remission, you will not be able to start tribunal proceedings.

“Government after Government has crowed from the rooftops about the introduction of new rights – but those rights are worthless unless we have the means to enforce them and to seek a remedy for their abuse.

“We note that the Government has not yet made a song and dance about the fact that these fees might be paid, in successful cases, by employers.

“Tactically, it seems to us that some employers are liable to let cases run their course. An employer might well think that an employee is unlikely to risk incurring the full amount of both issue and hearing fee, and so decline to look at early settlement in the hope that financial considerations will drive the employee to abandoning their rights.

“And since the hint is that the Employment Tribunal will have discretion to award the fees against the employer, might we see cases where the employee wins but still stands the fees – a pyrrhic victory indeed.”

To me, it really is a question of balance. If you make employment laws too rigid, it becomes harder for companies to get rid of underperforming staff, and the whole economy is dragged down. Rigid employment laws can stop jobs being created. If you think you’re going to be strangled by red tape – and might be ruined by the cost of a tribunal case if things don’t work out – you probably won’t hire staff, and keep your company at micro-level. But what happens if you wobble to the other extreme, and take away a huge raft of fundamental employee rights?

Employees will stop spending money on the high street, or back away from buying a new home if they fear they could be fired on a whim.

Nobody wants to see victims of bullying, racism or sexism denied justice because they can’t afford the fee to go to tribunal.