New dismissal laws and how they could impact on salon owners

The Government has made the first moves in its bid to bring confidence back to employers who feel overburdened by employment legislation. Employers are often reluctant to take on new employees because of fear of the red tape that might entangle them, should they later wish to let these employees go. The Government hopes that removing or reducing this red tape will open up a wave of employment opportunities for the unemployed. There have been a number of changes and proposed changes.

One of the first, and most high-profile changes introduced was to increase the length of service required to bring an unfair dismissal claim from one to two years. This increase affects any employee starting from 6 April 2012.

In increasing the length of service requirement, the Government's aims are clear. It gives a longer get out clause for employers by increasing the time an employee works before they can claim unfair dismissal rights - provided that the dismissal does not fall into one of a limited number of exceptional categories. It also hopes to cut the number of claims brought via Tribunal, thus reducing the financial burden on both employers and the Tribunal system. 

l Where an employee is dismissed as a result of trade union activities, because they are a member of a trade union or refuse to join a trade union 

l Where the dismissal was connected with the employee's pregnancy and maternity rights 

l Where the dismissal was due to the employee observing health and safety rules 

l Where the dismissal was due to the employee making a protected disclosure (whistleblowing) 

l Where the dismissal was due to asserting a statutory right. 

At present, it is difficult to assess whether this change has had the desired effect. The true impact, if any, is likely to be felt more long term as employers get used to the additional freedom the longer qualifying period provides. It will be interesting to see whether the next set of Tribunal annual statistics show any significant reduction in the number of unfair dismissal claims brought. The initial view is that employees are being more creative and alleging that one of the exceptional categories applies, to avoid the two-year requirement. 

Another proposal, likely to start from Summer 2013, is to permit employers and employees to have "protected conversations" when attempting to resolve unfair dismissal disputes. This would allow employers to deal with disputes in the knowledge that such conversations cannot be used in subsequent Tribunal claims.

The proposal includes template "settlement agreements" (and guidance on how to value disputes financially) to be produced by ACAS for use by employers. 

The proposals should increase employer confidence to settle disputes before the time and expense associated with Tribunal claims is incurred. However, the protection does not extend beyond unfair dismissal disputes and employers will not be protected if they behave 'improperly' during such conversations. What constitutes improper behaviour has not been clarified so employers must act with caution if they intend to rely on the proposed protection. The true impact of the proposals may, therefore, not be as widely felt as the Government hopes. 

The Government proposes to introduce a cap on awards made for loss of earnings in successful unfair dismissal claims. Currently, such awards are made at a level the Tribunal considers "just and equitable" (albeit subject to an overall statutory cap of £74,200). However, the Government proposes to limit these awards to cover a period of 12-months post-termination only. 

In practice, the proposed cap is unlikely to have any real impact on the average level of awards, especially given that the existing statutory cap is rarely applied and is only relevant for the most highly paid employees. For most claimants in unfair dismissal claims, the existing statutory cap would represent many years of lost earnings. 

However, this is perhaps not the true aim of the proposed change. Instead, the Government's aim appears to be to reduce the unrealistic expectations held by employees, who often mistakenly believe they will receive extremely large payouts if their claims succeed. Often, these unrealistic expectations encourage employees to bring weak or speculative claims. Likewise, employers often 

worry they will be liable for large awards should unfair dismissal claims be brought against them. In turn, this may discourage them from taking on new employees. 

The proposed cap should give employers and in particular employees more realistic expectations about the value of unfair dismissal claims. It is arguable, however, that if this is the Government's aim, it would be better achieved by making the Tribunal's annual statistics more widely known. For example, the average compensatory award last year was only £4,600, which is a fraction of the current statutory cap. 

Public knowledge of this statistic would do significantly more to change expectations than amending a cap that is rarely used in practice. There is also a risk that employees may pursue speculative discrimination claims (in which compensation is uncapped) to avoid the proposed new cap.

As the Tribunal publishes its annual statistics, we may get a sense of the impact the changes have had on the number of unfair dismissal claims brought and the average value of successful claims. 

The proposals should be seen as an encouraging step in the right direction and may give employers more freedom to take on new employees when they are needed and dismiss them safely, and cheaply, when they're not. 

However, the manner of the proposals suggest the Government will be unable to make sweeping changes overnight. Any changes will likely be introduced gradually, with the impact being felt even more gradually still.