Author: Ghazaleh Rezaie, 12KBW

The new Labour government promised an Employment Rights Bill within 100 days of the election. With only days to go before that self-imposed deadline passes and with reassurances from ministers that they are on track to deliver on the promise, Ghazaleh Rezaie takes a brief look at one of the biggest changes we can look forward to as Employment lawyers – ‘day one’ Unfair Dismissal Rights.

Day one Unfair Dismissal rights

The right to not be unfairly dismissed has been around since the introduction of the Industrial Relations Act 1971. Since that time the qualifying service requirement has ranged between six months and two years. The most recent change came in April 2012 when the qualifying service requirement was increased from one to two years.

The Employment Rights Bill’s biggest change is likely to be the removal of the qualifying service requirement for claiming ‘ordinary’ unfair dismissal i.e. making it a so-called ‘day one right’ for all employees for the first time ever.

Whilst the details remain unclear and the scope of the right is yet to be defined, this is a fundamental change which will likely be cheered by employees and trade unions but which will cause headaches for employers across the board.

The Dutch Model

The Organisation for Economic Co-operation and Development ranks the UK as 31st (out of 37 member countries) for the highest level of dismissal protection. In contrast, the Netherlands, where there are very restrictive rules against dismissal, ranks third highest. In order to predict the application of ‘day one’ unfair dismissal rights, it is worthwhile considering the Dutch model by way of comparison to better understand how ‘day one’ rights might work in practice in the UK.

In order to dismiss an employee, Dutch employers require prior approval from the Court or ‘labour authorities’. However, during a probationary period – capped in Dutch law at two months with no scope for any extension – no such approval is required if the employee is to be dismissed. That being said, probationary periods must be expressly agreed in writing between the employer and employee before the start of the employment relationship and apply only once in respect of each employer even if the employee is changing roles or is being transferred under provisions akin to a TUPE transfer unless the new role is one which requires clearly different skills or entails significantly different responsibilities.

The position is different in the Netherlands for fixed-term contracts. No prior approval is required for termination upon expiry of a fixed-term contract making fixed-term contracts very popular with Dutch employers. The length of any probationary period for fixed-term contracts is dependent on the length of the contract: for contracts shorter than six months, no probationary period is permitted; for those lasting between six months and two-years, the probationary period can be no longer than one month; and those longer than two-years can be no more than two months.

Can we expect similar protection for employees in the UK?

It remains unclear whether the Bill will seek to introduce any special or exceptional rules for dismissals during probationary periods. The government has sought to reassure employers that fair dismissals will remain possible during probationary periods “with fair and transparent rules and processes”.

It is possible that the government may seek to amend the Employment Rights Act 1996 to introduce a statutory cap on probationary periods and/or to limit the circumstances in which such probationary periods may be extended. If that were to happen, it’s not inconceivable that employees would lose the benefit of unfair dismissal rights during probationary periods.

If there are to be no restrictions on the length of probationary periods and/or their extension, the government may seek to introduce a mandatory requirement that such probationary periods or extensions be expressly agreed in writing between employer and employee prior to the start date. They may go even further to make a distinction between contractual start date and the start of employment so as to make the position fairer to both parties to the contract.

What do ‘day one’ rights mean for practitioners?

Whilst those of us with a Tribunal-based practice may welcome the introduction of the proposed changes given the likely and significant increase in the number of claims that will be issued, employers will, in all likelihood become increasingly reluctant to hire employees directly or to follow conventional resourcing models. We could see an increase in the number of employers considering alternative recruitment options such as agency workers and/or alternative contractual arrangements such as fixed-term contracts to try and limit the potential future liability they may face.

There are benefits to the change too. Historically, employees have been reluctant to seek new employment where they would have to wait two years to build up their qualifying service. With the advent of ‘day one’ rights, the recruitment pool for employers might be larger and better qualified. There is also the fact that there shouldn’t be a requirement to pay the ‘loss of statutory rights’ sum in successful unfair dismissal claims anymore – in the current economic climate, a £500 saving is a £500 saving after all!

How can employers minimise risk of Unfair Dismissal?

Whilst the risk of a finding of Unfair Dismissal is obviously increased because there is now effectively an additional two years at the start of the employment relationship in which a dismissal could be found to be unfair, the reality is that employers following good practice should be avoiding unfair dismissals in any event.

There is no change proposed to potentially fair reasons for dismissal nor indeed to the procedures to be followed and so good employers don’t need to change their practices.

Now would be a good time for practitioners advising employers to consider reviewing disciplinary policies and procedures and, in particular, training for those involved during the process. A solid foundation of a fair and reasonable disciplinary policy will minimise the risk of allegations of unfair dismissal be it after two days or two years.