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The Beecroft Report: welcome removal of barriers to growth or introduction of a fear culture for employees?

Monday, 21 May saw the publication of Adrian Beecroft’s report on employment law. The venture capitalist and Tory party donor was asked to prepare the report in August and September 2011, but it has only just been made public following a Freedom of Information Act request. The report has looked at a number of areas relating to employment law and has numerous recommendations. Some of the more controversial of the Beecroft Report’s recommendations are provoking heated discussion in the media.

The tone of the report is set in its introduction: “much of employment law and regulation impedes the search for efficiency and competitiveness […] that was addressing yesterday’s problem.  In today’s era of a lack of jobs those regulations simply exacerbate the national problem of high unemployment.”

No fault dismissal

By far the most controversial recommendation in the report is the introduction of compensated no-fault dismissal for any business, no matter what its size: the current government’s proposal for compensated no-fault dismissal envisages restricting the procedure to microbusinesses with fewer than 10 employees only. Under the Beecroft Report’s proposal, an employer would have the right to dismiss an employee without reason and that employee would be prevented from pursuing a claim of unfair dismissal, provided the employer makes an enhanced leaving payment.  The Beecroft Report states: “The result of this change would be that the onus would squarely be on the employee to perform well enough for the employer to value them as an employee.  It would no longer be possible to coast along, underperforming in a way that is damaging to the enterprise concerned but not bad enough for the employer to want to undertake the whole rigmarole of the unfair dismissal process.”

Unfair dismissal legislation

There can be no doubt that this would represent a truly radical reform to the law of unfair dismissal.  Whilst this ‘quick fix’ might be welcomed by some employers, it should be borne in mind that the law already provides employers with the right to dismiss for poor performance, provided the employer follows a fair procedure.  While the current regime undoubtedly gives protection to employees, it is certainly arguable it does so for employers as well, allowing them to give a clear reason for dismissal that is less open to challenge on discriminatory grounds.  Moreover, it is questionable whether the introduction of such a scheme would have the desired effect.  Business Secretary Vince Cable said of no-fault dismissals: “In my daily conversations with businesses, this has very rarely been raised with me as a barrier to growth.”

Equality Act 2010

Among other controversial proposals in the Beecroft Report is the abolition of the third-party harassment provisions contained in the Equality Act 2010. Mr Beecroft states “the legislation clearly creates a temptation for employees to conspire with each other or with customers to create a harassment situation which might result in substantial financial compensation from their employer.” It is unclear what evidence he has reviewed to support this view.

Redundancy consultation

Mr Beecroft would also like to see reform of the collective redundancy process, believing that 90 days’ consultation for employers wishing to make 100 or more redundancies is too long and prefers 30 days as a suitable consultation period: “If in the first thirty days no solution has arisen that management at least feel is worth exploring it is highly unlikely that one will be found in the following sixty days.” It would be interesting to see whether this view was borne out by the evidence. Arguably, it also neglects to mention that management may have known redundancies were in the offing prior to the beginning of the consultation and this contraction of the period only serves to increase pressure on employee representatives to try and negotiate an amicable solution to a large-scale redundancy in a third of the time.

Work permits

Also among the report’s more controversial proposals are the comments on updating and improving the CRB checking system and Work Permit Checks. Many of the features that are highlighted will be available when the new online CRB system is introduced.  This new system for work permits would “eliminate the risk of well-meaning employers fearing or facing prosecution for honest mistakes” and would also “allow HMRC […] to identify illegal workers who are being paid through the PAYE system.” This is likely to be welcomed by employers who currently face Draconian punishments.

The Department for Business, Innovation and Skills appears to be distancing itself from the more controversial elements of the Beecroft Report.  Vince Cable said: “We have always been clear that sensible and well thought-through reforms need a strong evidence base behind them, not just anecdotal experiences.”  He continued: “At a time when workers are proving to be flexible in difficult economic conditions it would almost certainly be counterproductive to increase fear of dismissal.”

TUPE legislation

The government has issued ‘calls for evidence’ in relation to particular aspects of the report, including TUPE amendments, collective redundancies, simplified dismissal procedures and compensated no-fault dismissal (which the Government intends to limit to microbusinesses only).  Consultations have also been issued on the proposal to abolish the third-party harassment provisions of the Equality Act 2010, with a closing date of 7 August.

Lyons Davidson’s employment team will be submitting responses to these consultations and comment on developments as they progress.

For more information on issues raised in this blog or employment law in general, contact Lyons Davidson’s employment team or call 0117 904 6000.

Posted on May 30th, 2012 by Lyons Davidson

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