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Ministers propose two year threshold for unfair dismissal claims

27 January 2011

A two-year qualifying employment period for bringing an unfair dismissal claim is among far-reaching reforms to the employment tribunal system put forward by the UK Government today.

Business Secretary Vince Cable launched a consultation paper that includes the doubling of the threshold as one of a range of measures to curb the number of tribunal claims, which soared by 56% last year to a record figure of 236,000, and remove what he called the "deterrent" for small firms to hire staff.

Another proposal is to introduce a fee for bringing a tribunal claim, to discourage unmerited or vexatious claims.

The Government wants to improve the "costly and time-consuming" tribunal system, claiming that businesses have to spend almost £4,000 on average to defend claims, and that the fear of tribunal claims is a "major impediment" especially to small firms seeking to take on more employees.

Compulsory mediation

Disputes would first have to go through a mediation stage via ACAS, which would "screen out" cases, but Mr Cable said that those with a genuine grievance would still be able to bring a claim if necessary. The paper also asks whether conciliation is likely to be more successful in some types of claim than others.

Other proposals include enhanced powers to strike out a claim and to make deposit orders; applying the civil court rule on liability for expenses; costs orders relating to the tribunal's own costs; possible sanctions where an offer of settlement has not been reasonably accepted; unfair dismissal cases normally being heard by an employment judge sitting alone; and a possible system of financial penalties for employers found to have breached employment rights.

The paper also asks whether automatic uprating of tribunal awards and statutory redundancy paymwnts should be retained; and if so, whether it should be related to the Consumer Price Index rather than the Retail Price Index.

Business leaders and trade unions were predictably split over the proposals. CBI Director General John Cridland called the proposed two year threshold a "positive move" that would give employers the confidence to hire, but TUC General Secretary Brendan Barber said ministers ministers' time "would be better spent looking at why so many companies, especially small employers, have such poor employment practices".

David Frost of the British Chambers of Commerce warned of the need for ACAS to be properly resourced if all claims had first to be lodged there.

Click here to access the consultation. The closing date for submissions is 20 April.


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