Labour Research July 2012

Law Queries

No-fault dismissals

Q. We have heard that the government is introducing no-fault dismissals — that is, the employer will be able to dismiss people at will. Surely this can’t be right?

A. Last year, the coalition government commissioned a report on employment law from the venture capitalist Adrian Beecroft.

One of Beecroft’s recommendations was the introduction of compensated no-fault dismissal. Under his proposal, employers would have been able to dismiss a worker without having to go through a proper procedure. The worker would have received some compensation.

Business secretary Vince Cable has welcomed many of Beecroft’s proposals. However, he rejected his proposal for a compensated no-fault dismissal. Despite this initial clear rejection, Cable has now revealed that he favours introducing a halfway house.

He suggests that an employer be able to offer a worker they think is not performing well a “settlement agreement” (the new name for a compromise agreement) under which the worker would be paid to leave in return for agreeing not to sue over the dismissal.

If the worker rejected the proposal, the employer could still take the individual through a formal process. Importantly, the employee wouldn’t be able to use the earlier offer of a settlement agreement against it at a tribunal to show that the process was pre-determined.