The Daily Telegraph yesterday leaked details of a draft report commissioned by David Cameron to look into employment law in the UK.  The report by Adrian Beecroft, a venture capitalist and Conservative party donor, argues that the current unfair dismissal laws hold back growth in the UK.  He argues that the length and complexity of the procedures involved, and the risk of a Tribunal claim if they aren’t followed, give rise to two undesirable outcomes.  In the public sector, under performing employees are left to coast along unchallenged and in the private sector small businesses opt not to risk employing staff, inhibiting their growth.

Beecroft’s proposed solution is to introduce a new approach of “Compensated no fault dismissal” which we shall call CNFD for short.  Under the CNFD approach, as long as no discrimination is involved, employers could dismiss employees at any time without giving a reason.  Employees would still be allowed to argue their case and request (but not demand) a transfer to another position, but if nothing suitable is available they would be dismissed with a payment similar to the existing notice and redundancy payments.

Unsurprisingly, these proposals have already provoked much negative comment from trade unions and Labour and Liberal democrat politicians.  The report is still in draft and is currently being considered by ministers, so what is the real impact likely to be?

Unfair dismissal legislation has already been marked as ripe for reform by the government.  Unlike much employment law it is a UK only law rather than an EU wide directive, so there is more freedom to make changes.  However, in his speech to the Conservative party conference in early October, George Osborne confirmed that the period of employment before a claim can be brought is already to be increased from one year to two with effect from 6 April 2012.  There is a strong argument that if employers already have two years to spot an underperforming employee and dismiss them without fear of an unfair dismissal claim, then this change in the law is not necessary.  Downing Street have already commented on the draft proposals to the effect that there are unlikely to be further changes to unfair dismissal laws, so it could well be that the report was leaked purely to make the changes already announced seem more palatable.

Finally, nothing in the Beecroft report or any of the other proposed changes will affect the existing rules on bringing a claim for discrimination, whistleblowing or simple breach of contract.  There is no minimum qualifying period for these claims and the first two have no cap on the compensation that can be awarded.  As specialist employment solicitors, we predict a big rise in the number of these claims after 5 April 2012, so staff training and properly implemented policies and procedures will paradoxically be more important than ever.

For more information, contact Minal Backhouse at Backhouse Solicitors on 01245 893400 or email