The House of Lords Blocks the Employment Rights Bill… Again

Louise Walker
Legal Director
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Last night, the House of Lords once again voted down the Employment Rights Bill. This vote follows the Government’s move away from its original pledge to grant employees “day-one” ordinary unfair dismissal rights, opting instead for a six-month qualifying period and the removal of the cap on compensatory awards for such claims. For more information on this significant departure and unfair dismissal see our previous JEL Alert on the matter here.

Why did the House of Lords Block the Bill?

The House of Lords blocked the Bill due to concerns on the proposed measure to remove the current cap on the compensatory award for unfair dismissal in its entirety. It was highlighted that the measure was introduced late in the legislative process without prior consultation. The House of Lords called for a review before any full removal of the cap.

What is the Compensatory Award Cap for Unfair Dismissal?

The compensatory award is granted by an Employment Tribunal following a successful unfair dismissal claim and reflects the employee’s loss of earnings resulting from the dismissal. This award is made in addition to the basic award (similar to a redundancy payment calculation), which is calculated separately.

Currently, the compensatory award is capped to the lower of 52 weeks’ pay or £118,223.

For our retained clients who attended the second part of our webinar series yesterday, we discussed that removing the cap would likely result in an unfair dismissal claim being a far more attractive remedy for high earners – a point that was raised during the House of Lords debate as a potential driver of increased claims in an already overburdened Tribunal system. On the other hand, it was noted that the removal could reduce the number of complex cases, as the Government believes the current cap incentivises claimants to frame cases as discrimination (for example) in order to access uncapped compensation.

What Happens Next?

Keir Starmer has now appointed 25 new Labour peers to the House of Lords to strengthen the party’s position in passing the Bill. We are closely monitoring the progress of the Bill through Parliament, and we shall continue to provide regular updates to clients on any notable developments. You can find our previous JEL Alerts on Employment Rights Bill matters here.

Next Steps

If you have any questions about how this change may affect you, or if we can provide support or assistance on any other employment law matter, please do not hesitate to contact a member of the team on 0141 331 5150.

Topics: Employment Rights Bill, Unfair Dismissal