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Australian Code rules for small employers?

16 April 2012 #Employment

Some key changes to the law on unfair dismissal and tribunal procedure came into effect on 6 April 2012 for all employers in England, Scotland and Wales, in particular the increase in the qualifying period of employment from one to two years in order to bring a claim of unfair dismissal.

It is important to remember, however, that this change will only apply to employees whose employment starts on or after 6 April 2012. In the meantime, employers who are taken to tribunal for unfair dismissal from 6 April will, in theory at least, be able to obtain a higher costs award against a claimant in tribunal without having to go the county court, with the increase in the maximum sum awardable increasing from £10,000 to £20,000. Plus, the maximum deposit that a claimant can be required to pay into the tribunal as a condition of continuing with a claim, if it is considered that the claim has little prospect of success, will increase from £500 to £1,000.

This may sound encouraging to small employers defending themselves against employment tribunal claims arising out of a dismissal. However, although the UK government is undertaking a review of employment tribunal rules, the current rules and their interpretation will be mean that costs and deposit orders will remain a rare occurrence. Hence, the increases in these thresholds may have very impact, if, as at present, the odds are heavily stacked against costs and deposit orders being made in the first place. Of course, employers need to be careful not to get on the receiving end of a costs order themselves.

It is likely then that the Government’s proposals to consider the following will be of greater interest, particularly to smaller employers:

  • A system of “protected conversations” between employer and employee with the aim, it is said, of enabling employers to more confidentially raise issues such as poor performance in an open way, free from the worry that it will be used as evidence in a subsequent tribunal claim. It is been confirmed that the Government will consult over this suggestion later in the year.
  • "Compensated no fault dismissals” for businesses with fewer than 10 employees.
  • Possible changes to dismissal laws and process, including to the ACAS Code of Practice on Discipline and Grievance and possibly introducing for small employers something like the Australian Small Business Fair Dismissal Code.

As regards the latter two proposals, there is a consultation period now underway with a call for evidence which will last until 8 June 2012.

The idea of no fault dismissal is that in return for the small employer paying an employee (not identified as being at fault) a set amount of compensation on dismissal, the employee would then not be able to bring a claim of unfair dismissal. The employer could still, at its option, rely on a fair reason for dismissal and not pay the compensation if it wanted. One of the matters for consultation is how the figure for compensation could be arrived at.

However, employees compensated for unfair dismissal would still be free to bring claims where they felt they had been dismissed for an automatically unfair reason (eg whistleblowing) or for any kind of discrimination in relation to the dismissal. This is a major drawback and the Government’s consultation paper itself identifies that more a half of unfair dismissal claims include a claim other than unfair dismissal. Of course, the UK’s discrimination laws are underpinned by European directive, which restricts the Government’s ability to manoeuvre on this issue.

Arguably of greater interest is the idea of adopting the Australian model, which would introduce the concept of a dismissal being deemed to be fair if certain basic procedural steps are complied with. That contrasts with the present system whereby although the ACAS Code has to be taken in account in deciding whether a dismissal is unfair or not, compliance with it does not make the dismissal automatically deemed fair. A considerable amount of discretion in the matter is afforded to the employment tribunal members, based on the interpretation of case law.

The Australian Code, which applies to business with fewer than 15 employees, requires employers to give employees a reason why they are at risk of dismissal based on their capability or conduct and they must be warned, preferably in writing, that they risk being dismissed if there is no improvement. The employee must have a chance to respond to the warning and be given a reasonable chance to rectify the problem. To demonstrate compliance with the Code, employers would need to provide copies of warnings, signed statements and possibly a completed checklist, which forms part of the Code itself. It represents something of a checklist approach to procedure (albeit completing the checklist does not make the dismissal fair), whereby a tribunal is more constrained by a code of practice and one which is significantly less onerous than the UK ACAS Code.

If the dismissal is the result of a genuine redundancy, the employee has no right to claim unfair dismissal.

It is certainly an interesting idea and, it seems, would mark a significant departure from the current regime in the UK. So, if you want to submit your own views in the consultation, go to before 8 June 2012.

Clarkslegal, specialist Employment lawyers in London, Reading and throughout the Thames Valley.
For further information about this or any other Employment matter please contact Clarkslegal's employment team by email at by telephone 020 7539 8000 (London office), 0118 958 5321 (Reading office) or by completing the form on this page.
This information is for guidance purposes only and should not be regarded as a substitute for taking legal advice. Please refer to the full General Notices on our website.

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