Earlier today, newly appointed ‘Enterprise Tsar’ Lord Young announced on Radio 4’s Today programme that one of his proposals to the government for slashing red tape for small business will be to increase the unfair dismissal qualifying period from one to two years
The move forms part of an extensive review of employment law which seeks to investigate ways in which the government can remove barriers to growth faced by small and medium sized firms and remove, or at least minimise, regulatory burdens.
Whilst it has been said that the government is actively considering the proposal, the timetable for a decision has yet to be announced. It is thought that there will very likely be a period of consultation beforehand, with Lord Young pledging to consult with small businesses before making any recommendations.
The length of service needed to qualify for unfair dismissal rights has always been a subject of debate. It began life in 1971, with employees waiting six months before gaining the right not to be unfairly dismissed. In 1980 this rose to one year for businesses with more than 20 employees, and then to two years in 1985, irrespective of the size of the business. In 1999, the Blair government reduced the qualifying period to the present one year.
The issue has always divided opinion, with some commentators labelling the current proposed move as ‘regressive.’ The rationale behind the proposed extension is that small to medium sized businesses will be less reluctant to recruit employees, thus widening opportunities in the job market. Lord Young submits that when the increase of the qualifying period from one to two years was implemented in the 1980’s, unemployment went down. However, TUC general secretary Brendan Barber said there is no evidence that making staff wait for two years to get protection from unfair dismissal will create any extra jobs.
The proposal also raises potential discrimination issues. In June 1999, the previous two year qualifying period came under scrutiny when it was submitted that it discriminated against women, who were proportionately less likely to be employed continuously by the same employer for two years or more. The House of Lords accepted this was the case but went on to say that the purpose of the qualifying period, namely encouraging recruitment by employers, justified any discrimination on social policy grounds.
If the change does occur, it will be reasonably good news for business, but bad news for employees. In principle, employers would have an extra year to dismiss employees without having to find a 'fair' reason for doing so. However, employers could still face certain types of discrimination and/or automatically unfair dismissal claims for which no qualifying period is required. From an employee’s point of view, it would mean that, provided their employer did not unlawfully discriminate or dismiss for an automatically unfair reason, they could be dismissed for no particular reason any time up to accruing two years' service.
In legal terms, the government could effect the change relatively easily. No Act of Parliament is required, only a Ministerial Order. However, it is likely that given the current economic climate, the proposal could face resistance from unions and other organisations that represent employees' interests.