New instant dismissal plans - bad for staff, good for business?

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The Fawcett Society spelled out this week how George Osborne's austerity cuts are threatening to reverse decades of hard-won progress on equality for women. It doesn't stop there: he also wants to turn back the clock on employees' rights.

In a recent speech to the EEF manufacturers' organisation, the chancellor urged employers to back US-style government proposals that would make it lawful for about 4.5 million small businesses to sack employees on the spot.

What lawyers call the "compensated no-fault instant dismissal" proposal would mean that small firms with fewer than ten staff can instantly dismiss an employee without giving a reason or having to prove fault, and can let them go with basic redundancy and notice pay. This is with the intention of boosting economic growth and ensuring that small businesses do not have to fear costly unfair dismissal litigation.

Right not to be sued out of existence
Osborne defended the plans, saying: "Plenty of trade unions and others will be submitting their evidence for why we shouldn't do this. If you think we should, and it will increase employment, then don't wait for someone else to send in the evidence. Send it in yourself.


"Of course, employees have rights and should be protected. But what about your right to start a business and not be sued out of existence?"

The chancellor did not come up with any figures or examples of companies being sued out of existence. Companies that go bust may end up getting sued over redundancies, but there aren't many cases of healthy firms being forced into liquidation by a tribunal claim, as employment law consultant Peta Fluendy noted in her column on Financial Mail Women's Forum.



However, this is not to say that some businesses haven't faced costly and sometimes infuriating claims. She told the story of one case this month where a lorry driver was awarded over £28,000 in compensation for unfair dismissal. He had been sacked for gross misconduct and negligence because he had driven his lorry into a hole, causing over £2000 worth of damage, whilst deviating from the route he was supposed to take to deliver toilets to the V Festival.

But hang on. Things are not always what they seem. Fluendy went on to point out: "The lorry driver was awarded £28,000 because he had been told to take that route by a festival employee. The hole was covered by a metal cover and gave way, which was not his fault. His compensation was high because his employer had not only dismissed him but had also refused to give him a reference [despite many years of service] – making it impossible to find a new job."

And the law already punishes those who pursue unreasonable claims. For example, in a recent case a woman who claimed unfair dismissal was ordered by a tribunal to pay her former employer nearly £2000 in wasted costs for pursuing her "misconceived" claim. She had been fired for gross misconduct after allegedly shouting and swearing at two employees of a major client of her employer.

What the law says
Under current UK employment laws an employer can only make an instant dismissal without notice on the grounds of gross misconduct.

In all other circumstances an employer must give an employee their correct contractual notice when terminating their employment or a payment in lieu of notice. An employee's notice period will be specified within their contract of employment. Failure to give the correct notice is a breach of contract and an employee would be entitled to bring a claim for wrongful dismissal.

The government has already announced plans to increase the qualifying period to bring an unfair dismissal claim from one to two years' service. An employee's right to bring a claim under the Equality Act 2010 should not be affected, though, as there is no minimum length of service required.

Likely impact
The government obviously hopes that the ability to sack people on the spot would encourage small firms to hire more by making it easier for them to get rid of unwanted people. But some experts say it could have the opposite effect.

Helena Woodward-Vukcevic, employment law specialist at law firm Hart Brown, said: "The full extent of this latest proposal is not yet clear but by diminishing the statutory rights of certain employees in order to promote employment within small businesses, may mean that it will have the reverse effect. There is of course the risk that employees may opt to work for larger organisations where possible, so that their employment rights will still be protected."

It looks like that would be the only way to protect yourself against sudden dismissal if these proposals become law: Work for a bigger organisation.

What do you think – should small businesses have the right to fire people on the spot? Would this deter you from working for a small firm? Let us know in the comments.

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