Curtailing access to Employment Tribunals – a liberal approach to fostering economic growth?

There is little disagreement that the economic growth figures for 2010 Q4 were very poor. When set alongside the performance of other developed economies they look even more anaemic. The Government is promising that the 2011 budget will be a budget for growth. But the Government is already bringing forward more focused initiatives with the justification that they are geared towards fostering private sector growth. Most recently Vince Cable has announced proposals for changes to employees’ access to Employment Tribunals.

The core proposal is that a worker will need to have been employed for two years, rather than the one year at present, before they are eligible to take a case of unfair dismissal to an Employment Tribunal. Defending a case that goes to Tribunal is expensive for employers, on average it is estimated to cost around £4,000. The argument is that the expense and bureaucratic nature of the process can act as a deterrent to taking on additional workers, particularly for small businesses. Lifting this burden will, the Government hopes, encourage employers to be more bullish in expanding their workforce.

The Government is also concerned that there has been a dramatic increase in cases taken to Employment Tribunal. The total number of claims rose between 2008-09 and 2009-10 by 56 per cent to 236,000. The Government suggests that its new approach will also be more effective in dealing with weak and vexatious claims. There is, of course, an implication there that the recent growth in claims is stuffed full of frivolous claims.

But is that a sensible inference for us to draw?

The headline figure for the expansion of claims surely looks alarming. But how should it be interpreted? It would be wise to look more closely at what is going on. What influences the number of people seeking redress through a Tribunal?

Most simply, although it is only part of their remit, the number of cases coming to the attention of the Employment Tribunal Service is going to be some function of the number of people being made redundant. In addition, from a slightly more socio-legal perspective, we would not expect all potential claims against employers to manifest themselves as a bid for formal redress. Whether an ex-worker pursues this route will typically depend on a cost-benefit calculation and that is contextual. If the labour market is strong and a worker will have no trouble in walking into another job then pursuing a claim for unfair dismissal may not seem worth the bother. But in a recession, when alternative employment is harder to come by, the cost-benefit calculation shifts and a claim for unfair dismissal and a bid for some form of redress becomes more likely. Finally, when economic conditions change sharply and employers seek to lose staff rapidly, especially if organisational survival is perceived to depend on reducing costs, there is increased potential for the redundancy process failing to tick all the legal boxes correctly.

We might expect that the sharp switch after 2008 from a period of economic growth to a period of economic retrenchment created the perfect conditions for a sharp increase in Employment Tribunal cases, without any greater proportion of them being vexatious.

If the statistics are examined more closely it is clear that there were further peculiarities about the 2009-10. There were major multiple claims relating to the Working Time Directive, many apparently relating to airlines. There was a sharp jump in claims relating to unauthorised deductions. There was a near doubling of cases relating to redundancy payments. Unfair dismissals accounted for less than a sixth of cases. Equally importantly, nearly two thirds of cases never reached a tribunal hearing, with more than three out of ten settled through ACAS conciliation. The Government’s reforms propose placing even more emphasis upon this type of alternative dispute resolution, which is in line with much current thinking and no bad thing in itself. Overall, 13% of cases were successful at hearing. But that represented a sizeable proportion of the cases that ever made it as far as a hearing. Indeed, claims were more likely than not to succeed once they get to a hearing.

It would be possible to reframe these statistics to tell a slightly less alarmist story, which would point less strongly to the need to reform a system which has become an unsustainable burden as a result of being unreasonably exploited by workers.

But perhaps in focusing on the statistics we would be missing the big picture. And the big picture is, in my view, rather troubling.

It would appear that the Government’s strategy for promoting economic growth so far comprises little more than systematically shifting the balance of power more firmly in favour of employers, to the disadvantage of workers. Before Christmas the Cabinet Office summarily abolished the two tier code for contractors to the public sector (as I discussed here). There are dark mutterings about the need to ‘do something’ about the unions if they insist on exercising the right to strike. It is only a matter of time before TUPE comes under great scrutiny. One can imagine the arguments now: ‘a luxury we can no longer afford’ in times of austerity. One person’s ‘barrier to growth’ is another person’s ‘hard won protection against exploitation’.

That moves of this type are welcomed by employers should be taken as no indication of their wisdom or desirability. As an employer the ability to dispose of one’s assets – including staff – in whichever way one sees fit, including arbitrarily, idiosyncratically, and without reference to any notions of fairness, equality or non-discrimination is surely a freedom to be welcomed. I’m sure it would be handy to be able to hire and fire with impunity.

It should be no great surprise that the Tories are seeking to use the parlous state of the UK economy and the need to stimulate growth as an excuse to roll back provisions that give workers the wherewithal to stand up to unfair treatment. They are just conforming to type – they are, after all, the party of the bosses not the workers.

Alongside the increase in the qualifying period, it appears that there is a commitment by the Ministry of Justice to consult on introducing fees for Employment Tribunal cases and appeals. One can imagine those seductive voices of efficiency arguing that it is only fair to test the strength of a case by asking claimants to put some of their own money at stake in pursuit of justice. Those taking a more critical stance, with a better developed understanding of social power and inequality, might ask ‘what money’? It appears to be the erection of a further barrier to justice for the poor.

I am troubled that Liberal Democrats are not only complicit in these proposals but Liberal Democrat ministers are actively promoting them. While no one can sensibly rule out proposals that will genuinely enhance efficiency, we ought to be much more circumspect about advocating measures that are primarily about reducing the protections of the relatively disadvantaged.

We should be reframing this debate to ask why is it that there are so many workers who feel that they have a cause to complain about the way they have been treated by their employer. Rather than treating the symptom why not address the problem? Instead of reducing workers’ capacity for achieving justice perhaps we should be thinking more about how to encourage more enlightened employment practice. How can we ensure that employers are aware of the rights of all parties to the employment contract and conduct themselves in a way that respects those rights? If that means simplifying the law and making it easier to understand then let’s do it. That is infinitely preferable to failing to tackle poor practice and ‘curing’ the problem by making it harder to complain about it.

Degrading employment conditions may deliver short term gains in employment, but it is not a sensible strategy for long term growth. It’s an inadequate sticking plaster. Britain is never going to be able to compete with developing countries on price, for example, without the immiseration of much of the working population. A more sustainable future would come from focusing on higher level skills and more advanced technologies. But that would require greater investment in technical and higher education. Oops.

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3 Responses to Curtailing access to Employment Tribunals – a liberal approach to fostering economic growth?

  1. Kelvin Kid says:

    Thanks Alex. This is just the analysis I was looking for.

  2. JamesS says:

    Agree with much of what you say – the German model of building a skilled and well protected workforce (via Work Councils etc) in industry has served them well in the productivity stakes – a new wave of labour market deregutation here might serve the interests of gangmaster type entrepreneurs and businesses that exploit cheap labour for profit, but it is not the solution to building and skilling up a modern industrial base in the UK.

  3. shodanalexm says:

    Thanks for the comments.

    @JamesS that is precisely the type of scenario I had in mind. At one level it doesn’t seem to me to be a hard lesson to learn – the German example has been there for a while! But it is a lesson that UK govts have seemingly failed to learn for several decades. Unfortunately, this generation appears no different.

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