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Increase to Unfair Dismissal Qualifying Period

The Chancellor of the Exchequer, George Osborne, announced at the Conservative Party conference that the unfair dismissal qualifying period will rise from one year to two years, with effect from 6 April 2012.

This announcement will be a welcome one for employers. The Department for Business, Innovation and Skills (“BIS”) issued a press release the same day setting out the government’s estimates that the proposed changes will save businesses £6 million per year and also result in the number of unfair dismissal claims dropping by 2,000 per year.

However, employers should not presume they are completely safe from potential claims in the first year or, from 6 April 2012, the second year, of an employee’s employment. Claims for discrimination, for example, do not require a minimum qualifying period and so, whilst the number of unfair dismissal claims should reduce, this may result in an increase in the number of discrimination claims, with employees trying to rely on discrimination arguments in the absence of a possible remedy for unfair dismissal. There are also circumstances where a dismissal is automatically unfair even where an employee has not completed a minimum period of service (e.g. where dismissal is because the employee is pregnant).

Employers should also ensure that their disciplinary procedures are expressed to be non-contractual (save for provisions relating to the implementation of penalties short of dismissal, other than warnings, such as suspension, demotion, transfer of duties or loss of pay), or otherwise correctly apply any such procedures even when dismissing an employee who does not have unfair dismissal protection, as a failure to follow such procedures may give rise to a claim by the dismissed employee for breach of contract.

Finally, employers should be wary of dismissing an employee, without notice or on less than the statutory minimum one week’s notice where that employee is in the 51st, or, after 6 April 2012, the 103rd, week of their employment, as, in the absence of gross misconduct or some other fundamental breach of contract, the effective date of termination will then be extended to the date that the employee's statutory minimum notice would have expired, meaning that the employee will qualify for unfair dismissal protection. However, this principle does not apply in respect of contractual notice periods which are longer than the statutory minimum, e.g. an employee who has been employed for 49 weeks and is contractually entitled to a month’s notice, but is dismissed without notice, will not qualify for unfair dismissal protection, despite the fact that had he been given proper notice he would have been employed for over a year. He would, however, be entitled to a payment in respect of notice – which could be tax-free, depending on the circumstances. Also, in such circumstances the employer might invalidate post-termination restrictions in the contract of employment. 

Whilst the decision to extend the qualifying period is a welcome one for employers, advice should still be sought before dismissing an employee with less than the qualifying period of service to ensure there are no other issues which could give rise to a potential claim and that the employee’s notice entitlement is dealt with in the way which best suits the employer.

If you would like any advice relating to this topic, contact me on 01952 291222 or email bethan.jones@lblaw.co.uk.