New legislation in dismissal claims

Government’s debate over unfair dismissal has been big news recently, reflecting the interest in employment law policy during difficult economic times.

At the end of September 2011, the Government announced a change to the qualifying period for unfair dismissal claims in the UK from one to two years. It is proposed that this change will come into effect from April 2012. Christopher Hitchins, Partner at Morgan Lewis, examines.

The Government’s rationale for making this change is set against the backdrop of an overall review of the UK’s employment legislation, which is seen by the Government as being too cumbersome. In the Government’s view, the burden for employers in complying with UK employment law has had a disparate impact on businesses, which in turn has inhibited growth. Specifically on the qualifying period change, the Government’s rationale was that the current one year period discouraged employers from hiring employees.

The change to the qualifying period has, perhaps not surprisingly, been met with scepticism in some employee interest groups, including unions. Sceptics site the fact that the change was announced prior to the response to consultation being published, and that it was not necessarily supported by research, as being reasons as to why the change is ill-conceived. But is the change in fact lawful? Interestingly, we’ve been here before. In the early 1970s, there was no qualifying period for unfair dismissal claims. By the early 1990s, the qualifying period had risen to two years. In the case of R v Secretary of State for Employment, ex parte Seymour-Smith the Government was challenged on this limit on the basis that it indirectly discriminated against females, and as such was incompatible with the EC’s Equal Treatment Directive.

How did the House of Lords reach this decision, and would it decide the issue differently today? The House of Lords took into account guidance from the ECJ as to what constituted a “disparate impact” on women. If there was a disparate impact, then the provision would be discriminatory. The ECJ had suggested two tests which might indicate a “disparate impact”: the first was where a “considerably smaller percentage” of women than men were able to satisfy the condition. The second was that there could be “disparate impact” if there was a “lesser but persistent and relatively constant disparity over a long period”.

In addressing the first of these, the House of Lords looked at the relevant statistics at the time that the legislation came into force (in 1985), and when the claim was made (in 1991). It found that in 1985, 77.4 percent of working men satisfied the condition, whereas only 68.9 percent of women did. In 1991, the percentages were 74.5 percent and 67.4 percent respectively. The House of Lords did not feel that this lower percentage of women who could satisfy the condition was “considerably smaller”. Indirect discrimination, however, can be objectively justified, broadly if the provision is a proportionate means of achieving a legitimate aim. The House of Lords felt that the Government had a legitimate aim, that of creating jobs, that there was evidence to suggest that introducing the qualifying period was a suitable method of achieving this aim, and that the period of six years (between 1985 and 1991) was a reasonable period to wait to see whether the policy was working. Therefore, it upheld the qualifying period as being lawful.

Clearly, the two-year qualifying period could again be challenged post April 2012, on the basis that it could be indirectly discriminatory on the grounds of sex, or even age or race. If the statistics support this assertion, that the qualifying period had a disparate impact on a particular protected group, then the provision could still be justified by the Government’s social policy aim to create more jobs, if the courts felt that this was a legitimate aim, and that the Government could reasonably have considered that the introduction of the two-year qualifying period was suitable for achieving this aim. The strength of the Government’s supporting evidence would therefore be scrutinised, although it would perhaps be surprising if the courts’ ultimate decision was to rule that the legislation was unlawful.

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