The Forward March of Labour, facilitated?

Labour has radical plans for employment rights. Britain’s bosses so far appear to be turning a blind eye. It might cost them a lot of money.

In 1998 the then Labour government issued a Green Paper “Fairness at Work”.  It was a “Where were you when Kennedy was shot?” moment for practising employment lawyers, which in my case was driving home on the Warwick Road.  I nearly crashed the car.

It wasn’t that the Blair administration was proposing to reduce the period of qualifying service for unfair dismissal from two years to one, which was news enough.  Astonishingly, it was also proposing to remove altogether the cap on compensation for unfair dismissal.

At a stroke, it looked as if my workload and that of every colleague in the specialism, whether acting for employees or employers, would perhaps double.  Certainly, it would change.  No longer would employees have to squeeze their claims into one of the heads of discrimination to access the big bucks. For straight white middle-aged male executives – and there were and are a lot of those – Christmas had come in Spring.

In the end, it didn’t happen.  I can’t recall why but I imagine there was some pretty strong lobbying from business interests as to why this would fundamentally shift the balance between employer and employee in a way perhaps not quite consistent with the rest of the New Labour agenda, for reasons which still apply today.   Because there may be much less ‘fairness’ in this than is first apparent.

Anyway, it was all very different under the coalition and the Conservatives. They immediately reversed the change to the period of qualifying service and put it back up to two years.  The Conservatives brought in a venture capitalist to propose reforms based on – it seemed to me – everything every VC I’ve ever worked with has hated about employment law, but they largely went nowhere.

However, as the political season turns, so it looks does this particular weathervane. Labour’s current proposals – as set out in their Green Paper from 2022 “A New Deal for Working People” and with a strong sense of deja vu – are to remove the qualifying period for unfair dismissal and, again, to abolish the cap on compensation for unfair dismissal.  This time, will they go through with the latter?

The lifting of the cap seems to have gone under the radar.  There has been some rowing back on the removal of the qualifying period, apparently to allay business’s concerns.  Labour’s position is now to allow “probationary periods with fair and transparent rules and processes“.  Nothing seems to have been said about compensation.

Perhaps surprisingly, Britain’s biggest business lobby, the CBI, makes no mention of Labour’s proposals in its business manifesto “Delivering Sustainable Growth” released on 28 November.  It does address labour market issues, but very much in terms of skills, immigration and health. When it talks about “future proof[ing]”, it is about promoting “inclusive growth“.   There is a reference to easing “barriers to work” but there is no specific mention of the plans of the party which is likely to form the next administration.

Now, this may be the way that things are done.  I can see lots of reasons why a business lobbyist at this stage would not want to position themselves in head-to-head opposition to the people likely to be forming the next government. This might not be business’s biggest concerns about Labour’s plans: removing the cap is almost a footnote in context. And it may well be that if Labour comes to power then the CBI will then be lobbying ferociously to water down these proposals, as I assume they did in 1998.  There is however no sign of it now.

Later though may actually be too late. Angela Rayner has given a “cast-iron commitment” to an Employment Rights Bill within 100 days of taking office. Good luck to any lobbyists looking to derail that.

That said, there are reasons for most employers to be sanguine about the proposed change. The average compensatory awards for unfair dismissal fall well below the theoretical cap of the lower of £105,707 or a year’s gross pay: the mean for 2021/22 was £13,541  They reflect actual or likely loss and there is no plan to change this formula. So, for most employees, these reforms would be unlikely to make much difference in the amount of money they have to pay out. For what it’s worth, my practioner’s instinct says that the practical impact is likely to be that elevated expectations of reward will increase the number of claims. Sure, no-one believes there’s a pot of gold at the end of the rainbow, but what if it’s a really big pot? 

Ironically, in reality, the population whom it could most affect might be senior executives in a VC-backed businesses who might be able to claim compensation in respect of the equity incentive schemes carefully drafted out of the ambit of their contractual entitlement.  Statutory compensation can and does leap the bounds of the written document.

This is not a group about whom Labour are likely to care all that much but one would have thought it was one dear to the hearts of the CBI and other business lobbyists.  Certainly, if VC’s found much to dislike about employment law in the 2010’s, they are really going to hate it in the 2020’s. This could completely change the basis on which the industry rewards senior executives within its investee companies.

Perhaps that was what gave New Labour pause in 1998. Perhaps it may cause Keir Starmer’s Labour to rethink. We shall see.  My instinct is that my colleagues and I may be about to get a lot busier.