The latest development in the rapidly changing UK employment law scene is the implementation of new regulations from 1st June. These reduce the employment service period to one year to qualify for protection from unfair dismissal. The regulations precede the implementation of the new Employment Relations Act within the next few months, with its raised level of compensation for unfair dismissal to £50,000.
Chief Executives and Personnel Directors should be seriously considering the impact of the legislation. It will have a significant effect on the unwary. Even though the average compensation awarded by an Employment Tribunal in the past has been under £4,000, the new ceiling - and an increasing trend by Tribunals to assess future potential losses - is likely to have a major adverse effect on employers.
Imagine this scenario. A 42-year-old senior executive with ten years' service and a salary of £60,000 is dismissed in late 1999 after allegedly deteriorating performance over a few months. In fact, other staff perceive that his face no longer fits as new directors arrive. His three months' notice period is sweetened by an additional month.
Because the company has possibly not fully followed its own internal procedures exactly, and ignored the last above average appraisal rating, the employee's solicitor (working on a no win, no fee basis) files an unfair dismissal claim. There is a directions hearing initially but the full hearing takes place nine months after the termination because of delays in the system. During this time, discovery of a number of documents has been required, and numerous "without prejudice" discussions to try and resolve the matter between the company's and employee's lawyers have come to nothing.
At the full hearing, the employee's solicitor points out that in the sector it would be nearly impossible for her client to obtain a new post at a similar salary level, and calls an expert witness to testify that ageism is rife. She also shows that in practice her client has only been able to find temporary work since dismissal. Moreover, she argues that the loss of future pension rights will have an impact on his retirement provision.
During the three-day hearing, the company's lawyers vigorously defend the claim, and four senior company directors and officials attend to amplify their witness statements.
The tribunal finds in favour of the employee and awards maximum compensation. When the company considers the true cost of management time and lawyers' fees, the actual cost is close to £90,000.
If this was your organisation, could you afford to write this off?
So, how can you minimise the risks to your business in this new era, especially if race, gender or disability discrimination cases continue to have unlimited compensation possibilities? (In this case study, if the executive had been away sick for increasing periods, the outcome could have been far worse).
You need to do more than just handle dismissals properly. You can reduce risks quite substantially by having an independent check on all your procedures, from recruitment through to performance management, so that you will not be caught out.
To discuss the benefits of a pre-emptive professional audit, call 01799 520823 or email roy@rltassociates.com.