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Unfair Dismissal

I congratulate the hon. Member for North Southwark and Bermondsey (Simon Hughes) on securing this debate and welcome the opportunity to comment on some of the general issues surrounding the unfair dismissal legislation. I am advised in my brief that he has been campaigning on behalf of his constituent for some years, and I commend that activity. I regret to tell him, however, that I shall be unable to give him any satisfaction in my response this evening. He said that his office had contacted mine, but I am advised that we received no such communication. I hope that he will forgive me, therefore, given the specific nature of his questions, if I write to him about them rather than dealing with them in an ad hoc fashion. I know from the briefings that I have been getting over the past two weeks that I shall be able to give him better information if I write to him, and I undertake to do so after the end of tonight’s business. I must stress, however, that the general issues that I shall be discussing will address many of the points that the hon. Gentleman has raised. While I of course understand that his constituent was disappointed with the outcome of his own unfair dismissal claim, it would be inappropriate for me to comment on decisions made by the employment tribunal, or by the Appeal Courts, which are independent judicial bodies. It might be helpful if I start by setting out how the legislation works. Protection against unfair dismissal has now been in force for more than 30 years. The fundamental tenets of the legislation have always been, first, that an employer must have a potentially fair reason for dismissing an employee. It could be a reason relating to the employee’s conduct or to his or her capability or qualifications. It could be that the employee was redundant or that there was a legal reason preventing his or her continued employment—the classic example is a driver who loses his or her driving licence. Or there could be some other substantial reason to justify the dismissal. If an employee believes that he or she has been dismissed unfairly, they can complain to an employment tribunal, subject to the necessary qualifying service. At the tribunal, it must first be shown that the individual was in fact dismissed. The employer must then show that the dismissal was for a potentially fair reason. If he or she can do so, the employment tribunal will consider whether the employer acted reasonably or unreasonably in dismissing the employee for that reason. The concept of acting reasonably is crucial to the unfair dismissal legislation. Understandably, case law has developed over the decades that helps the employment tribunals to decide what is reasonable in particular circumstances. For instance, if a dismissal relates to an employee’s capability, a tribunal will expect the employer to have appraised the employee’s performance properly and identified the root of the problem. The employer must not only do that, but warn the employee of the consequences of failing to improve and give him or her a reasonable chance to do so. That is acting reasonably; dismissing a poor performer when he or she first turns in poor work is not. Case law also guides tribunals in considering dismissals related to an employee’s conduct. In that regard, the employer must have reasonable grounds for believing that the employee was guilty of the conduct that caused the dismissal. He or she must have carried out as much investigation as was reasonable in the circumstances. The courts have developed another important test to assist tribunal decision making, which the hon. Member for North Southwark and Bermondsey raised specifically and took issue with. It is known as the band of reasonable responses test, or sometimes as the range of reasonable responses test. Essentially, it requires tribunals to consider whether an employer’s action in dismissing an employee fell within the range of responses to a given situation which might have been expected of a hypothetical reasonable employer in the same circumstances. If it did, the dismissal would be fair. The test has important and, I believe, desirable effects. It reduces the risk of inconsistent decision making from one employment tribunal to another. It acknowledges that more than one response to a given set of circumstances might be reasonable. For instance, two employers might be more or less lenient, according to the culture of their workplaces and the standards of conduct that they explicitly require of their employees, towards the same act of misconduct. It also underlines the principle that employment tribunals should avoid subjective decisions. To put it bluntly, tribunal members are not there to say, ““We would not have sacked that employee, therefore it is an unfair dismissal,”” or, ““We’d have sacked him or her, too, so it is fair.”” They must not seek to substitute their view for that of the employer. They must judge cases objectively in the light of all the circumstances. The development of the test over many years has not been without its difficulties and inconsistencies, at least as tribunals have at times purported to apply it. That has led to criticism, which has been twofold. The first criticism has been that the test is a perversity test, or what amounts to one—that it compels tribunals to find that any decision to dismiss is reasonable as long as it is not so unreasonable as to be perverse. The second has been that the test prevents employment tribunals, which are sometimes described as ““industrial juries””, from drawing on their own workplace experience in deciding whether a dismissal is fair. If those criticisms ever held water, however, they no longer do so. Later case law has made it clear that the band of reasonable responses test is not a perversity test—the relevant cases are the 2001 Court of Appeal case, to which the hon. Gentleman referred, of Post Office v. Foley, and the case of Midland Bank plc v. Madden. Case law has also made it clear that it is not an error of law for tribunals to refrain from applying the band of reasonable responses test at all. There will be cases in which the employer’s conduct is so clearly reasonable or unreasonable that that there is no range of responses to consider. It has also emphasised that the test does not preclude tribunals from applying their industrial experience to the facts of a case. They can do so, and should do so, in deciding how a hypothetical reasonable employer might have responded when presented with the same facts. None of that will assuage the disappointment of employees and/or employers who lose unfair dismissal cases, as one or the other must fail in every case. Their disappointment is natural, and it is perhaps also natural that in some cases it will promote a belief that the law must be loaded against one side or the other. The law is about balance, however, and it would clearly be unworkable to allow employers no discretion at all in dismissing employees. Since they must have some discretion, the question is how much. What is the proper balance between protecting employees from unfair treatment and enabling employers to run their businesses without undue constraint? I realise that this will disappoint the hon. Gentleman, but I believe that the current legislation and the band of reasonable responses test get the balance right. At the moment, we have no plans to override that, but as I said, I shall write to him about where we are with employment legislation. That said, we are not complacent about employment law. We have made significant changes since 1997. For instance, for a long time the period of service that most employees must accrue before they qualify to make an unfair dismissal claim stood at two years. Some employers claimed that a substantial qualifying period was necessary so that they could rectify recruitment mistakes without the risk of facing a tribunal claim. We accept that recruitment mistakes do happen, but we believed that two years was longer than employers needed to discover and deal with them. In 1999, therefore, we reduced the qualifying period to one year, thus protecting more employees against the risk of arbitrary dismissal. I could go on to describe in detail the new disputes resolution procedures that we introduced via the Employment Act 2002, to which the hon. Gentleman referred. We hoped that they would help to improve protection for employers and employees against having to have recourse to employment tribunals, and we believe that they have done so. Time is against me, however. I said at the outset that I did not expect the hon. Gentleman to be satisfied with my comments, and I have probably lived up to that expectation, but I have undertaken to write to him in response to the specific questions that are now recorded in Hansard, and I shall ensure that my office deals with that as expeditiously as possible. Question put and agreed to. Adjourned accordingly at fourteen minutes to Eleven o’clock.