Partner Article

Unfair dismissal cap: style over substance?

Martin Patt, associate at law firm Lester Aldridge LLP, shares his thoughts following the announcement that payouts to unfair dismissal claimants will be capped.

The Government’s announcement on capping the unfair dismissal award in tribunal at the lower of 1 year’s salary or £72,300 would appear to be more style over substance. The average award for straightforward unfair dismissal claims last year was only about £5,000 and less than 5% of claimants receive a full year’s salary from a Tribunal. Although they sound far-reaching, the practical effect of these changes for employers will be very small indeed.

The Government’s announcement on so-called “settlement agreements” is similarly underwhelming. The proposal is that the offer of a settlement agreement cannot be used against the employer in a subsequent unfair dismissal case; crucially however, this will not be the case in unlawful discrimination claims. So an employee can still allege before a tribunal that a settlement offer was put forward only because the claimant was on maternity leave, of an ethnic minority, because of their sexual orientation etc. In our experience it is rare that the offer of what is currently termed a “compromise agreement” severely prejudices an employer in an unfair dismissal case, without the taint of discrimination, in any event.

These proposals would appear to be “sound bite” politics from the government - with little in the way of substantive change.

This was posted in Bdaily's Members' News section by Lester Aldridge LLP .