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‘You’re fired!’ – The end to unfair dismissal?

joanna hodgson

“You’re fired!” Lord Sugar’s famous catch phrase, could become commonplace if the UK government acts on recommendations leaked to the Daily Telegraph last week.

At present, any business emulating an Apprentice style dismissal is likely to find itself in front of an Employment Tribunal facing claims of unfair dismissal and breach of contract at a minimum. However, venture capitalist Adrian Beecroft, the author of the report, wants to end all this, and makes various recommendations including adopting a system of ‘Compensated No Fault Dismissal’.

Joanna Hodgson
Joanna Hodgson
Solicitor at Thomas Eggar

The published portion of the report focuses on poorly performing employees. In this context, Beecroft claims that the UK’s current unfair dismissal rules have a “terrible impact… on the efficiency and hence competitiveness of our businesses”. He puts this down to the fact that, “The rules both make it difficult to prove that someone deserves to be dismissed, and demand a process for doing so which is so lengthy and complex that it is hard to implement. This makes it too easy for employees to claim they have been unfairly treated and to gain significant compensation. ”

His theory has elements of truth – it can be very time consuming for an employer to dismiss a poorly performing worker, but it can also be quite straightforward if the employer has appropriate systems in place and there is no potential discrimination claim. Beecroft’s plan only applies to cases where no discrimination is involved. This is an important and appropriate exemption. However, very often an element of discrimination (real or imagined) is involved, which leaves a relatively small number of cases that would be affected by the proposed reforms.

Add to this the likelihood that a majority of employees dismissed under the No Fault procedure would try to point to an element of discrimination, and the number of cases you actually get rid of is comparatively small. The most likely impact of No Fault dismissal is that the number of employment cases would burgeon, further weighing down the already overloaded employment tribunal system with spurious claims of discrimination. This would be a bad thing for employers and employees – for employees because those with genuine cases would have to join a lengthy queue and their access to justice would be significantly delayed, and for employers because even if an employer has a fool proof defence, it still needs to incur the costs of asserting that defence in the tribunal.  
It is likely that an employee subject to a No Fault dismissal would fear the stigma of being branded as ‘lazy’ or ‘incompetent’. An employee’s perception and fear of such a label is likely to encourage legal challenge. This, added to the probability of a massive increase in discrimination claims, could well mean that far from helping business, Beecroft’s proposed reforms have the effect of landing businesses with a greater number of more complex employment tribunal claims.

So, what can an employer do to reduce the likelihood of employment claims and make it easier to dismiss a ‘lazy’ employee?

1.    Hold regular performance management appraisals for all employees.
Very often, the biggest hurdle for employers is that they have no evidence of poor performance. This means that any process has to be started from scratch and this is what can lead to a dismissal process being very lengthy. If an employer has a good appraisal system in place – i.e. regular discussions with an employee about their performance, then poor performance can be picked up before it gets to the dismissal stage.

2.    Make sure your appraisals give accurate feedback and address problems as they arise.
It can be very difficult to give an employee negative feedback, particularly if the person giving it has to work closely with the person receiving it. This uncomfortable situation can lead to problems never being addressed or to positive feedback being given in an attempt to encourage a poor performer.

What this means in practice is that an organisation ends up with a known poor performer but no recorded negative feedback, or worse, actively positive feedback! Although this may avoid conflict within the team, from a performance management perspective, it is disastrous to achieving a fair dismissal.

3.    Establish the reason for poor performance
Regular appraisals give the employee the opportunity to improve, but more importantly, give the employer the opportunity to investigate whether the problem is simply laziness or whether more complex reasons are to blame, whether these are organisational (such as poor line management) or personal to the employee (such as a drop off in performance due to illness or disability). Establishing the reason for poor performance, and amending the action taken based on that, is what will save an employer from an expensive employment claim.

4.    Have clear policies on discrimination and make sure you can spot it if it happens.
The most costly employment tribunal claims are those where the employee claims discrimination. No employer wants to be seen to be discriminating against employees, and the best way to prevent this is to be alert to the potential areas of discrimination.

Disability, age, sexual orientation and gender are just some of the ‘protected characteristics’ under the UK’s discrimination law. Although some discrimination is easy to identify, some is a bit harder to spot, so it is worth taking advice if you are in any doubt about whether discrimination may be a relevant issue.

It is very important therefore to regularly measure performance, find out the reason for the poor performance and to check that any action would not subject the employee to discrimination under the current law.
Adrian Beecroft believes that making it easier to dismiss employees will encourage economic growth. However, it seems far more likely that it will encourage a rise in costly discrimination claims, putting further pressure on the employment tribunals, leading to greater uncertainty for employers and employees.

What would really help businesses is a reform of the underfunded employment tribunals. Swifter access to justice and costs sanctions for employees who make spurious claims would protect both reasonable employers and disadvantaged employees. The government is consulting on these issues at the moment and it is hoped that this will lead to some positive reform. Speed and clarity for both parties are what will lead to economic growth and change “you’re fired” into “you’re hired”.  

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