Size really doesn't matter to workers

Michael Heseltine's plan to scrap unfair dismissal protection for employees of small businesses is a discredited concept, a labour law expert tells Grania Langdon-Down

Scrapping the employment protection rights of workers in small businesses would be a return to the master and servant laws of the Victorian era, according to Dr John McMullen, a labour law expert .

"There is no country in Europe which does not have a law on unfair dismissal," he said, expressing surprise that the Government could even consider depriving 9 million workers of their employment rights.

"It would mean you would have no right to challenge your dismissal at all - however unfair or arbitrary it was. All civilised Western countries believe you should have a law to control arbitrary dismissals, otherwise you are going back to the master and servant laws of the Victorian age."

Dr McMullen, 41, is the national head of employment law for solicitors Pinsent Curtis, which has offices in London, Leeds and Birmingham. He is one of only a very few practising solicitors to cross the academic divide, combining his professional role with being Professor of Labour Law at Leeds University.

Pledges to cut red tape have been a recurring theme of the Government. But the suggestion that small business employees could lose their right to challenge unfair dismissal came out of the blue, Dr McMullen said.

"The idea is a surprise.The focus recently has been on changing industrial tribunals in relation to their efficiency - not in relation to people's rights to use them."

The inevitable controversy that followed the leaking of the proposal last week forced John Major to step in to deny any intentions to end unfair dismissal protection.

Although Downing Street sources were quick to play down the proposal, saying it was "on the back burner with the heat low", clearly, the heat could be turned back on if the Conservatives win the general election.

The majority of safeguards, such as rights to redundancy and to challenge unfair dismissal, come under the Employment Protection Consolidation Act 1978. The Wages Act 1986 controls the way employers can make stoppages from pay.

Dr McMullen stressed that small businesses already received some special treatment. When an industrial tribunal considers whether an employer behaved reasonably under Section 57 (3) of the 1978 Act, it is supposed to take into account the size and resources of the company.

Small businesses are able to sack people more easily if they are off sick and the business cannot manage, and they need less elaborate disciplinary procedures than large employers. Small businesses with fewer than 20 workers were also exempted from the 1995 Disability Discrimination Act.

Dr McMullen believed any further removal of employees' rights could be legally possible in some areas - but not where it touched on discrimination.

Small businesses employing five or fewer workers were originally exempt from the sex discrimination rules, for example, but that was found to be unlawful by the European Court.

Dr McMullen said the idea of removing employment protection rights was a "passe and rather discredited concept dating back to the early Eighties" that supporters justified by claiming it would encourage small businesses to take on more staff.

"There is no decisive empirical evidence whatsoever that removing small businesses from employment protection law would create new jobs," he said. "With regard to unfair dismissal, most people think any removal of employees' rights would be totally wrong. It is in small businesses that you most need protection.

"Why should you have two classes of employees - one protected and one not? Why should employers be allowed to behave badly?"

Dr McMullen pointed out that unfair dismissal protection was brought in by Edward Heath's government. The prime justification was to offer people a "civilised" way of dealing with a problem rather than by industrial action.

Since unionisation was often non-existent in small business, the law now provided employees with virtually their only protection.

"The whole point of a tribunal is to improve behaviour and provide a statutory stimulus to ensure employers follow proper procedures," Dr McMullen said.

There are on average more than 70,000 industrial tribunals a year, with the majority won by the employer. The number went up to about 120,000 this year because of 50,000 cases resulting from a European Court decision on part-time workers and pensions.

Compensation is limited to pounds 11,300, with average awards for unfair dismissal of about pounds 3,000.

small business leaders have long called for exemption from unfair dismissal claims. The Deputy Prime Minister, Michael Heseltine, has claimed such a move could save small firms up to pounds 200m in the cost of cases taken to tribunals.

Dr McMullen said: "That makes it sound as if it is all to do with businesses defending claims that should not have been brought in the first place. But only a small number are brought frivolously. Most of those defending claims should have got the procedures right in the first place."

He said it could be argued that there were problems with the tribunal system, in that employers did not recoup their costs if they won.

However, he said: "The tribunal system is supposed to be user-friendly. Claimants do not get legal aid and many rely on funding by a trade union or an organisation like the Equal Opportunities Commission. A claimant would only have to pay costs if they had acted frivolously."

At present, dismissal law is not covered by the European Union, but there are plans to harmonise the wide differences to be found among member states. In Germany, for example, employers have to show good cause before a judicial body before they can sack someone.

As Dr McMullen pointed out: "Our laws are not as tough as in some European Union countries. In some, there is a much greater emphasis on reinstatement, which only happens in 1 per cent of cases in this country."

If the safeguards were removed, the only way people could protect themselves would be to ensure they had a good contract with a generous notice period. "But how many would have the bargaining power to get a good contract? We are not talking City fat cats here but the average employee who gets what he is given," he said.