Employment law is not working: we need a solution
David Woods, December 06, 2011
“Don’t get me started on employment law. It almost appears as if the decision-makers deliberately set out to avoid any input from the HR profession.” This is the view not of HR magazine (where do you start to outline the complexity within employment law?), any journalist, political commentator or union representative. It is the gripe of an HR director – Guy Pink, HRD of drug and alcohol treatment charity Addaction, which has 1,000 staff.
His comment throws a spotlight on the mess that is employment law in the UK today. The people that have to deal with employment law at the coal-face - small business CEOs, HR directors and line managers - do not have a say in the regulations that affect them or their staff.
The phrase 'legal maze' comes to mind when discussing law at work and it is hard to believe, at the close of 2011, there is any way through the ever-blossoming thicket.
Every week seems to usher in another announcement of an impending revelation on law or further changes to legislation. Less than two months ago, for instance, a leaked draft report for the Government appeared to suggest employees should be prevented from raising claims of unfair dismissals.
Adrian Beecroft, author of the report - not an HR expert, but a venture capitalist who has given more than £530,000 to the Tories under David Cameron - argued for such a change to the law on the basis of the combined benefits of economic growth and reduction in red tape. He believes this would make businesses more competitive and therefore more likely to grow.
His justification for this proposal is that it would allow employers a risk-free way of removing under-performing staff and being able to dismiss employees they saw as 'coasting', secure in the knowledge they would be protected by statute from unfair dismissal claims.
The Government is also thought to be considering a £250 up-front fee to lodge a tribunal claim, with a further £1,000 due when the hearing is listed. The proposed change is expected in April 2013.
In another blow, workers will have to be at a firm for two years before they can make a claim to a tribunal, up from one year at present, according to plans unveiled by chancellor George Osborne at the Conservative party conference. These are due to be introduced by April 2012.
However, in May, the Government published a consultation on planned changes to employment law to encourage a culture of 'flexible, family-friendly employment practices'. The outcome is expected in later this month.
According to Shelley Duddy, a solicitor at law firm SNR Denton, proposals include unpaid leave for fathers to attend antenatal appointments, an 18-week period of maternity leave for mothers, followed by a 34-week period of shared parental leave, the right to request flexible working to be extended to all staff with 26 weeks' continuous employment, increased flexibility on rescheduling, carrying over and 'buying' or 'selling' of annual leave.
But, in a seeming volte face, weeks before this statement, business secretary Vince Cable said businesses with fewer than 250 staff could refuse employee requests to work flexibly or part-time, to bolster growth of the economy and reduce regulation of entrepreneurs.
And with the Government set to open yet more consultations in the New Year, on TUPE, the modern workplace and tribunals, one could be forgiven for believing employment law has become nothing more than a carousel of never-ending committee meetings.
But the plethora of announcements has led employment lawyers to question if politicians are just testing the water and no firm decisions have been made. Confused? You should be.
Employers are calling for simplification of the law, so they can focus on growth strategy, without worrying about being taken to tribunal because they unwittingly overlooked something - especially prevalent in SMEs.
Pink explains: "We have five experienced HR people supporting 1,000 staff and I would like to think we know what we are doing and advising on. We don't however get any support from the national decision-makers. Instead, their decisions are a hindrance to those of us who want to be able to operate legally and follow not just the letter but the spirit of the law.
"Given a large amount of our employment legislation comes from Brussels, any likely changes are purely Government sound-bites and will do nothing to ease the difficult day-to-day work all HR departments are doing. I don't think this is going to prevent us from doing what we have always wanted. It just makes our lives more difficult - unnecessarily so."
HR magazine put the challenge to the UK politician responsible for employment law, the minister for employment relations, consumer and postal affairs, Lib Dem MP Edward Davey. His Department for Business, Innovation and Skills (BIS), headed by Cable, is behind the 'red tape challenge', where members of the public are invited to put forward parts of legislation they think are unmanageable, in a bid to prompt the Government to discuss and possibly remove them. BIS also launched a policy that for every new bit of employment regulation announced, another has to be removed.
At a press briefing, Davey tells HR magazine: "We are delivering on cutting red tape. We have already made a £600 million reduction. People are impatient to see change - and George Osborne's announcement to extend the qualifying period for unfair dismissal to two years, has been warmly welcomed, giving employers the confidence to take new people on.
"We have an employer's charter (see box, opposite) to change people's perceptions of employment law. The Confederation of British Industry says we live in the least regulated labour market on earth - but we want to carry out the red tape challenge because we have a belief that we can improve the EU, as some other labour markets are not working so well."
He adds: "It takes a bit of time when cutting red tape - but we are pushing this agenda. Don't lose faith in us." Employers have lost faith in the Government when it comes to employment law, by all accounts.
Pink explains: "As a charity, we occasionally get tribunal claims. The way these operate would try the patience of a saint. Where a litigant has no intention of settling, we have no alternative other than to fight, ratcheting up significant legal bills - when this money could be better used on frontline services. The changes in the tribunal process designed to make the system more open seem highly unlikely to succeed.
"The idea of moving the timescale to bring a claim of unfair dismissal back to two years is laudable, but everyone knows that if you want to bring a tribunal claim, add a discrimination angle to ensure the case gets heard. This change on its own won't help.
"We have a lot of services transferring to us, so we are all experts on TUPE. I have yet to read a more ill-conceived piece of employment legislation that seems designed for the lawyers to interpret rather than for commonsense to prevail. The Government has removed some of the codes of practice on workforce matters to protect public sector employees - but in failing to remove elements relating to pensions, it has left us with a headline-grabbing change and no substantial variation below."
The employment lawyers Pink discusses are paid - out of an HR budget - to explain and consult with HR directors on employment law, as well as represent their organisations in litigation cases or tribunals. Even they think the complexity around regulation is damaging.
Kevin McCavish, head of employment at Shoosmiths, explains: "There is too much complexity in the law and any attempt to simplify it is backfiring. The Employer's Charter is meaningless and won't cut it with HR."
Commenting on the Beecroft Report, he adds: "Because of the EU, in the UK unfair dismissal is all we can tinker with and it is the easiest to deal with. Discrimination is harder, especially if it is linked to unfair dismissal. I would question what Beecroft's qualifications were in employment law - he sidelined discrimination and didn't even recognise it.
"There have been too many departments, consultations and staff changes involved in drafting employment legislation."
Andrew McDonald, head of the employment law team at Berrymans Lace Mawer, adds: "Employment law is an occupational hazard for small businesses - laws used to be announced ad hoc, but now businesses can plan for changes on certain dates. But with regards to proposals to simplify employment law, the Government does have its hands tied. It is a good idea to have discussions if they lead to proposals - but whether or not the red tape challenge will amount to no more than a talking shop, remains to be seen."
But even as HR magazine was going to press, BIS announced yet another consultation - this time into allowing employers to have "frank conversations" about poor performance with employees without fear that they could be used as evidence in a tribunal. Further proposals, announced only weeks ago, also include: a call for evidence on the length of time required for a consultation period on planned redundancies, in a bid to reduce this from 90 days, to 30 days; a requirement for all claims to go to the conciliation service Acas before reaching employment tribunal and the options for a scheme to allow for more simple tribunal cases to be settled within three months.
The news (which was branded the "biggest employment law shake-up for 10 years") prompted Unite's general secretary Len McCluskey to brand the announcement "a charter for bullies and rogue employers", while the CIPD said its "unintended consequences" could add to complexity in business rather than reduce it.
This came only weeks after deputy prime minister Nick Clegg, in a speech to small businesses, urged employers to treat staff like human beings and "not potential litigants".
Surely this conflicts with Beecroft's "draconian measures", charging staff who want to bring a tribunal claim and increasing their length of service to two years before they can take this sort of action?
Dave Allen, MD of IT and internet provider NetApp, employs 500 people. He says: "I don't think legislation should be about making it easier to sack staff - it has to be balanced. Employers should set people up for success.
"Legislation is there to protect employees from poor management and I think [with legal complexity] the Government is missing the point. Legislation should give staff a basis and clear expectations of fairness, equality and good treatment. It is up to leadership to find a way through."
Easier said than done, says Ann Bevitt, head of the employment and labour group at international law firm, Morrison Foerster. She says: "Will the situation be any simpler this time next year? Maybe - but that depends on where the economy is. Some of the proposals will be implemented, some will not be - but I think we'll be in a similar position as now.
"My advice would be to start with what you know will happen - it is unrealistic to think you could be on top of everything. Keep a look out for Government responses to consultations and you should have a sense of where things are going."
Tom Flanagan, national head of employment at law firm Irwin Mitchell, works closely with BIS. He co-authored its guidance on the Agency Workers Regulations and helped create the Government's current Employment Review when the Conservative party was in opposition. He is working with HR directors to help them compose responses to various employment law consultations.
But he can't shed much light either. "It is a dogs dinner," he almost laughs. "Disconnect is the point here. There are six initiatives going on at the same time in employment law [the employment law review, including TUPE; reform of employment tribunals; the draft Beecroft Report; the 'modern workplace' consultation on diversity; the 'red tape' challenge; and the possible reform of trade union law] - but there is no overview and this is what we need.
"The Government is testing the water. Following the press around the leaked Beecroft report, [David] Cameron said he isn't supporting this - but I have doubts around that.
"And George Osborne made a seemingly decisive announcement on unfair dismissal during conference season - with a consultation on the same issue still going on."
And moving the argument from the legal profession to the HR sector, Misty Reich, HR director at fast food giant KFC, explains: "What seems clear to me is that the approach is to address employment law one topic at a time and in isolation - and, as with most things, decisions in isolation lead to isolated practices - and a system that has no synergies or shared purpose.
"So what I would be passionate to see is an overarching framework for employment law in the UK that clearly articulates the principles and vision that should be the backdrop to all employment laws in place. Is the most critical driver of business growth and employment generation the protection of employment for those working - or different altogether?
"If we establish this principle and the Government bites the bullet to choose one side of a fence or the other, as opposed to flip-flopping, you would have a basis to evaluate all existing legislation and determine the need for future changes."
We could end this analysis of employment law here, challenging HR directors to do their best to get to grips with the consultations, the announcements, the leaks, changes in employment ministers and the committee meetings.
But what if we were to go one step further and call readers to action to do something about it?
Otherwise, the situation will worsen, while the Government opens yet more consultations in the New Year.
The engagement task force headed by David MacLeod in 2010, along with its various guru groups, has made strides in pushing employee engagement up the Government's agenda and has proved means of increasing productivity using engagement tools.
More importantly, it has also shown when HR directors and thinkers are involved in these groups (BT's Clare Chapman, the CIPD's Jackie Orme and Lancaster Business School's Cary Cooper), positive developments can - and will - be made.
When it comes to employment law, as it stands, the Government holds meetings with lawyers, the CBI and legal bodies, while HR directors (like almost everyone else) have been asked to post their suggestions to consultations or outline their responses to consultations.
Employers don't want to find legal loopholes to dismiss employees, they want staff to be engaged and productive at work. But they do not want to live in fear of tribunal claims either. A commonsense approach is needed more than ever.
So HR magazine has launched a campaign to form a new taskforce where HR directors, business groups, unions and Government representatives sit down together and come up with solutions - after all it is HR directors and CEOs in smaller businesses who will be the people dealing with legal issues in work at the coal face.
The details of the call to action are outlined overleaf and we will put the challenge to the Government in the New Year.
Some of the country's most prominent HRDs, academics, CEOs, employment lawyers and trade union representatives have already come forward to call for change.
Will you join us?
The union position
With a membership of 1.5 million people in sectors including health, construction, IT, finance and pharmaceuticals, Unite is one of the biggest trade unions in the UK. Its director of legal services, Howard Beckett, gave HR magazine his take on the proposed changes to employment law.
He explains: "Announcements such as the extension from 12 months' to 24 months' service before making a tribunal claim and the introduction of employees' having to pay fees is failed policy. Employees used to have to work 24 months before making a tribunal claim, but this was reduced because it was discriminatory to women - and staff having to pay £1,250 in employment tribunal fees is horrendous."
He adds that employment law complexity is a "failure of Government" and the situation is not improving, which is fundamentally detrimental to growth, because staff need to feel secure in their work.
"The complexity around employment law is complete nonsense," he continues. "We want more consultation and the Government has to recognise collective strength and collectivity - and the simple reality is that [employment law] problems can be solved with collectivity."
But he adds: "We are open to discussions. We don't have an agenda against HR professionals - and we want to have meaningful discussions. The Government was not prepared to have discussions with us over changes to public sector pensions until three million people moved to ballot over strike action against it.
"Ideology can't come from people in Government who have never worked. We need conversations and collectivity to ensure a secure and loyal workforce."
Tribunals: be forewarned
In 2010 and 2011, there were 218,100 employment tribunal claims made, and given the cost and pressure put upon employers and employees going through the system, it is not surprising the Government is investigating changes to the system.
"When it comes to employment tribunals, the Government has given an impression we would end up with a simple structure," explains James Wilders, employment partner at law firm Dickinson Dees. "But this hasn't happened."
This year, the Government's suggested two main changes to legislation around employment tribunals are: extending the qualifying period for staff to two years (up from one) before they can lodge a claim; and introducing fees of £1,250 for employees who are currently working to take their employer to tribunal.
Wilders adds: "Employment tribunals were designed in the 1970s to be cheap and informal, with unions, a judge, employers and lawyers. But the law has become more complex and this is no longer quick and informal. In fact, it is like full-blown court in everything but name - with oaths, evidence and so on."
Dickinson Dees runs mock employment tribunals to show clients how the process works. Delegates receive notes of the proceedings in advance, watch the mock tribunal and have the opportunity to ask questions afterwards.
"Employers often think, 'let's go to tribunal as a point of principle', but when they see how emotional and difficult it can be they often reconsider," adds Wilders. "This puts them in a much better position to decide whether to fight or settle. Forewarned is forearmed."
The employers' charter
According to Business Link, as an employer - provided you act "fairly and reasonably" - you are entitled to:
- Ask an employee to take their annual leave at a time that suits your business
- Contact a woman on maternity leave and ask when she plans to return
- Make an employee redundant if your business takes a downward turn
- Ask an employee to take a pay cut
- Withhold pay from an employee when they are on strike
- Ask an employee whether they would be willing to opt out from the 48-hour limit in the Working Time Regulations
- Reject an employee's request to work flexibly if you have a legitimate business reason to do so
- Talk to your employees about their performance and how they can improve
- Dismiss an employee for their poor performance
- Stop providing work to an agency worker (as long as they are not employed by you)
- Ask an employee about their future career plans, including retirement.
This is intended to help employers understand what they can do in general. But, as the Department for Business Innovation and Skills points out, individual circumstances may vary and employers should act in accordance with their legal obligations.?For more information, visit www.businesslink.gov.uk/employerscharter
What happened in employment law in 2011
With all the discussion around proposed employment legislation, what has in fact happened this year? Shelley Duddy, lawyer at SNR Denton, summarises four main changes that came into effect in 2011.
1. Abolition of the default retirement age
The default retirement age (DRA) was abolished on 1 October, although since April employers have been unable to use the DRA to retire employees. Now, if an employer wishes to have a compulsory retirement age, it must be able to justify it by showing a sound business reason for the age chosen and that there is no less discriminatory way of achieving that outcome. Acceptable reasons may include health and safety and workforce planning. But it will not be easy to prove objective justification and it will be necessary to provide evidence if challenged.
2. Additional Paternity Leave Regulations 2010
The Regulations apply to fathers of babies born on or after 3 April 2011. Eligible employees gain the right to take up to 26 weeks' paternity leave while their baby is between 20 weeks and one year old, provided the mother has returned to work.
This is paid, subject to eligibility criteria, if the mother would have had maternity pay for the same period.
3. The Bribery Act 2010
The Bribery Act 2010 came into force on 1 July 2011, introducing a new 'corporate offence' of failing to prevent bribery. An organisation will be liable if a person 'associated with' it offers a bribe, intending to give the company a business advantage. Employers will have a defence only if they can prove they had in place 'adequate procedures' designed to prevent bribery.
This means businesses will need to have suitable anti-corruption policies and provide training for staff on a regular basis. If a company is guilty of the corporate offence, they could receive an unlimited fine.
4. Agency Worker Regulations 2010
On 1 October, agency workers became entitled to enjoy the same basic working and employment conditions, such as pay and holidays, as those enjoyed by directly hired employees, after they have worked in a role for 12 weeks.
From day one of their assignment, agency workers will also be entitled to the same access to job vacancies and shared facilities (eg canteens, crèches and gyms).
The Regulations are not retrospective, so the counter began on 1 October, leading commentators to speculate as many as 500,000 agency workers could lose their jobs before Christmas this year.