The Government today put forward plans to increase the qualifying period for unfair dismissal claims from one to two years and suggested fees for taking employment tribunal cases under plans to reform the system.
Ministers laid out a series of "important reforms" for consultation aimed at improving the way the "costly and time consuming" employment tribunal system worked.
Tribunal claims rose to 236,000 last year - a record figure and a rise of 56% on 2009 - and business has to spend almost £4,000 on average to defend itself against a claim, said the Government.
"We've heard loud and clear the concerns from businesses up and down the country that the system has become too costly, takes too much time, and that it is too easy to make unmerited or vexatious claims.
"We're particularly concerned that it places unnecessary strains on small businesses," said a government spokesman.
Key changes being proposed include increasing the qualifying period before workers can bring a claim for unfair dismissal from one to two years after businesses said the existing legislation was too weighed against them when it comes to the decision to employ people.
The Government will also consult on introducing fees for bringing a tribunal claim, saying there were concerns that the current system leads to a large number of unmerited or vexatious claims.
Ministers also published an Employers Charter setting out what measures could already be used to manage staff "reasonably, fairly and lawfully".
Business Secretary Vince Cable said: "Disputes in the workplace cost time and money, can affect morale, reduce productivity and hold back businesses.
"We often hear that knife-edge decisions about whether to hire new staff can be swung by concerns about ending up in an employment tribunal if things don't work out.
"Today's proposals address these concerns and should help give employers more confidence.
"In the business world there is also a common misconception that employment protections are all one-way - towards the employee. The Charter we are publishing today tackles this myth by setting out clearly some of the most important rights that employers already have in the workplace."
John Cridland, the CBI's Director-General Designate, said: "For far too long the tribunals system has put the interests of lawyers above those of employers and employees. Given that 2010 saw a 56% rise in tribunal claims, the Government must look at ways of strengthening the process.
"It is in everyone's interests that disputes are resolved swiftly and fairly. Introducing an element of charging would help weed out weak and vexatious claims, clearing the way for more deserving cases to be heard.
"Extending the qualifying period for unfair dismissal is a positive move that will give employers, especially smaller ones, the flexibility and confidence they need to hire."
TUC general secretary Brendan Barber said: "Delivering justice to the thousands of people who every year are wronged at work should be at the heart of any change to the tribunal system.
"While employer groups complain that tribunals are costing them too much, they have lost sight of the fact that if firms treated their staff fairly, few would ever find themselves taken to court.
"Instead of making it harder for employees who've been treated badly at work to seek justice, ministers' time would be better spent looking at why so many companies, especially small employers, have such poor employment practices.
"Rather than being taken in by the employer lobby, the Government should stand firm and allow employment tribunals to continue holding rogue employers to account, and delivering justice for all workers who have been discriminated against or treated unfairly."
Steve Radley, director of policy at the Engineering Employers Federation, said: "These proposals are a potentially welcome package of reforms to the employment tribunal system. In taking this forward Government must develop a firm approach that will help deter spurious claims and simplify the system, whilst ensuring that mediation is the first port of call and a recourse to legal action the last.
"This should also be the first step in what should be a parliament-long project to reduce the burden of employment legislation on companies.
"Employers are currently facing a number of major challenges such as the removal of the default retirement age and changes to the use of agency workers. These will have a substantial impact on managing a business."
David Frost, director general of the British Chambers of Commerce (BCC), said: "Employment tribunals are one of the top business issues and we strongly welcome the Government's move to reform the system.
"The current system wastes business time and money, and distracts employers from growing their businesses and creating much-needed jobs. In particular, the introduction of a fee for claimants will help to discourage spurious and baseless claims."
The BCC also welcomed a proposal to require all claims to be lodged with Acas to allow conciliation before they reached a tribunal.
"This is a very positive step but must be accompanied with enough resource for Acas to deal with new claims," said Mr Frost.
Bob Crow, general secretary of the Rail Maritime and Transport union, said: "With hundreds of thousands of people facing the loss of their jobs in the austerity cuts this year, it is now crystal clear that the Government intend to give bosses the right to hire and fire at will.
"You will have to wait two years for protection under the law with these plans and that's a green light for workers to be dumped out on the cobbles just before they get their 24 months service under their belts."
Prime Minister David Cameron said: "A critical element of the Government's growth strategy is to create the conditions which allow businesses, especially smaller businesses, to flourish and expand, by reducing regulation and maintaining a flexible and dynamic labour market.
"Today's announcements on reforms to employment law are among the first conclusions of our Government-wide growth review, and highlight our determination to ensure that employment law is no longer seen as a barrier to growth, while making sure that employees and employers are treated fairly.
"Giving businesses the confidence to take on somebody new will be a real boost to the economy, and help generate the sustainable growth we need."
John Walker, chairman of the Federation of Small Businesses, said: "Small firms struggle with the red tape surrounding employment laws and workplace disputes. They do not have the big HR departments that big businesses have to deal with them, and a third of small firms rate the grievance procedure as extremely complex to follow.
"Small businesses are put off from taking on new staff because they fear the dispute process, so Government proposals to reform workplace disputes are welcomed by the Federation.
"However, the Government is giving with one hand and taking away with the other. This year is set to see a plethora of employment laws come into force and if the Government truly want to create an environment for growth, this reform must be coupled with a moratorium on all employment laws in 2011."
Acas chief executive John Taylor said: "We welcome the emphasis that the consultation places on earlier resolution of employment and workplace disputes. We know from our own work that prevention is better than cure but where disputes do arise, early intervention can stop the situation from turning ugly and resolve things more quickly.
"A call to the Acas helpline can often be enough to nip a problem in the bud. An independent study found that an estimated 16,000 employment tribunal cases were avoided last year following calls to the helpline.
"The proposed expansion of our pre-claim conciliation service - which saves the time, cost and stress of dealing with a claim to an employment tribunal for employers and employees - is further proof of its success.
"Research shows that when staff time and legal costs are factored in, businesses are saving £5,200 on average, compared to resolving a dispute once an employment tribunal claim has been made. It also allows the parties to agree the terms of any settlement rather than have a solution imposed upon them."
Alexander Ehmann, of the Institute of Directors, said: "We very much welcome these proposals. Too many employers are being held to ransom in employment tribunals by vexatious employees and no win, no fee lawyers.
"This has been bad for business performance and bad for job creation. We also welcome the proposed expansion of Acas's pre-claim conciliation service. This has the potential to root out some of the most dubious claims and save employers and employees a lot of wasted time and money.
"However, the impact of today's proposals will be marginal in terms of boosting business growth and job creation if other areas of employment law remain unreformed or, worse still, made more onerous for employers. We remain very concerned about other Government plans in relation to parental leave, new flexible working rights and the default retirement age."
Stephen Overell, associate director of the Work Foundation, said: "Doubling to two years the length of time someone must work before they are entitled to basic employment rights will do little to encourage employers to create more jobs while adding to rising job insecurity.
"The effect of the move may well be a short-term reduction in the numbers of employment tribunal claims because people will have to work longer before they qualify for unfair dismissal rights. About a quarter of the labour force will have their legal position worsened, but its effect on job creation is likely to be very modest."
Mike Emmott, of the Chartered Institute of Personnel and Development, said: "The CIPD welcomes a greater role for the Acas conciliation service in hopefully heading off a greater proportion of employment tribunal claims before they reach the courts. Acas conciliators can play an invaluable role in getting parties on both sides of a dispute to consider alternative means of dispute resolution such as mediation.
"We also support plans to give judges greater scope to tackle weak or vexatious cases by increasing the deposit and cost limits they can impose on such claims.
"However, increasing the period of time before staff can claim unfair dismissal from one to two years' service is unlikely to have a major impact on the number of tribunal claims because many claims for unfair dismissal are also linked to discrimination claims which are not limited by employees' length of service. There is also a danger that the two-year threshold might be held to be sexually discriminatory - as the turnover rate for women is higher than that for men."
Unite general secretary Len McCluskey said: "The Government is taking us back in time to the days when your boss could say, get your coat you're fired. This is the clearest signal yet that working families are on their own under this Government.
"It is utter nonsense to suggest that granting employers the power to sack workers on a whim will stimulate employment. It's equally wrong that the bulk of claims are vexatious. These proposals are a shameless, cynical attack on workers' rights which are already the poorest in the EU.
"Unite will fiercely oppose the Government on this issue. Working people breathed a sigh of relief when Labour reduced the qualifying period for unfair dismissal, now workers are holding their breath."
Mr Cameron met small business owners from west London and asked them about their thoughts on employment tribunals.
In the meeting at Octink printing company, he said the Government wanted to alleviate "fear" over the employment process.
"What we are looking for is all of these things that will help employers think 'This year I will take someone on'," said the Prime Minister.
Employment Relations Minister Edward Davey, who also attended the meeting, said: "We want to reform employment tribunals because there has been a lot of concern that these aren't good for employers or employees.
"A lot of money is wasted, a lot of time, a lot of heartache which doesn't help either party.
"So what we want to do is see if we can improve mediation so we can resolve workplace disputes early on.
"We want to give Acas a role in getting involved before a case goes to tribunal to see if they can bring the dispute to an end."
He said the reform also looks at unfair dismissal.
"At the moment, if an employer wants to dismiss an employee - and not get taken to court for unfair dismissal - they have to do that within a year and that sometimes ends up with them dismissing someone rather earlier than they would have done," he said.
"By moving the period to two years it would actually give a chance for that employer-employee relationship to develop and to cement, and we think that's good for jobs.
"I think it will increase business confidence for taking people on and that will hopefully result in reduced unemployment."
Responding to claims that the reforms would affect women more than men, Mr Davey said: "It is absolutely wrong actually, if you look at what we're doing to try to reform the tribunal system, to improve the way employment legislation works. It will result in more people being employed, and that will include women as well so it is a good thing for men and women."
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