Unfair dismissal: limiting the limits

The recent announcement from Vince Cable seems to put an end to the prospect of “no fault” dismissals. Such dismissals whereby employees could be “fired at will”, subject to a pay off, had been the brainchild of Adrian Beecroft but despite support from business groups these will not be implemented.

Better news for businesses is the prospect of further limits to compensation payments in unfair dismissal claims. Change was heralded by the Enterprise and Regulatory Reform Bill of earlier this year (see our posting on 29 May 2012) and Mr Cable’s latest announcement brings this to a public consultation. The consultation documents can be found here. The current limit on the Compensatory Award for unfair dismissal is £72,300, and this is usually increased in line with inflation in February each year. Mr Cable’s proposal is that the limit should be changed to an unspecified lower figure or a combination whereby the maximum payment is the cap or 12 months’ pay, whichever is the lower.

However, although the proposals seem likely to go ahead, it may be some time before employers feel the effect. Firstly, there is a consultation to complete and secondly changes in legislation often involve transitional periods. Further, some dismissals are not subject to the statutory cap; most notably these include when the dismissal has been for an unlawful discriminatory reason or when the employee is a whistleblower. Absolute reliance on the cap may leave employers with a nasty shock. The consultation ends on 23 November 2012, so watch this space.

If you would like more information about this please contact Alexandra Carn alexandra.carn@edwincoe.com

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