01 September 2009

Should employers welcome the recent changes to the unfair dismissal law?

On 1 October 2009, the Employment (Jersey) Law 2003 (the "Law") will be amended to give the Jersey Employment Tribunal the power to direct an employer to re-employ an employee who brings a successful claim for unfair dismissal. The changes to the Law also allow the Tribunal to reduce the amount of compensation awarded to an employee who brings a successful claim for unfair dismissal where this is in the interests of justice, for example where the employee is partly to blame.

Re- Employment of an Employee

Understandably, employers may be concerned about the prospect of having to re-employ an employee who has brought a successful claim for unfair dismissal. It is often the case in such circumstances that the relationship between the employer and the employee has broken down, and in some instances may be hostile, by the time the matter comes before the Tribunal. However, the amendment to the Law does try to recognise such difficulties by providing that, before making a direction for continued employment, the Tribunal must take into account:

  • the employee's wishes;
  • whether it is practical from the employer's perspective; and
  • whether it would be "just" to require an employer to re-employ the employee where an employee caused or contributed to the dismissal.

Employers may also find that their business is adversely affected by the uncertainty of not knowing whether the Tribunal will require them to re-employ the employee, either in the same job or another "suitable" or "comparable" job. The needs of the business may mean that it is inconvenient to have to wait for an employee's case to be heard by the Tribunal before an employer makes a decision to employ a permanent replacement or fill other vacancies. Some employers may be tempted to put the needs of the business first in this situation, however, they should be aware that the Tribunal will not take into account the fact that the employer has engaged a permanent replacement for the employee unless the employer can show:

  • that it was not practical for the employer to manage without engaging a permanent replacement (we anticipate that strong evidence will be required to satisfy the Tribunal); or
  • where the employee has not, within a reasonable amount of time, given any indication that (s)he wishes to be re-employed by the employer, that it was no longer reasonable for the employer to manage without a permanent replacement.

If a direction for continued employment is made by the Tribunal then it will set out certain requirements which an employer must comply with; for example, the employer may be required to ensure that the employee benefits from a pay rise or any other improvements to the terms of employment introduced after the date of the dismissal. Where an employee is to work in a different role then the direction will specify certain terms, such as the identity of the employer, the nature of the job and the salary payable. 

The employer will not have to pay any arrears of pay (which includes any bonus or contributions to the employee's pension scheme) for the period in between dismissal and re-employment commencing. Provided the employee is re-employed in accordance with the direction issued then no other financial compensation is payable.

Penalty for failing to re-employ

If an employer does not comply with the direction for continued employment in full then the Tribunal can award the employee compensation of up to 26 weeks' pay. If an employer disregards the Tribunal's direction for continued employment and does not re-employ the employee, then the employee may be awarded up to 52 weeks' pay (although compensation may be reduced where an employer satisfies the Tribunal that it was not practicable to comply with the direction or alternatively where an employee unreasonably prevents an employer from complying with the direction).

The UK Experience

The UK Tribunals have had the power to order employers to reemploy employees for a number of years. The latest available statistics show that in 2007/8 only 0.1% of cases that proceeded to a Tribunal hearing in the UK resulted in such an order1. It may be the case that, due to the more limited opportunities available to employees in Jersey, this remedy proves a more popular option with employees than in the UK. We remain of the view however that the overall numbers are still likely to be relatively small given the difficulties of an employer and employee continuing in a relationship once the parties have been engaged in a legal dispute. Further, requiring small employers to re-employ employees could present more difficulties than might be the case in large organisations and so smaller employers may find it easier to establish that it is not practical for them to re-employ an employee. Jersey has a high proportion of small employers: around 75% of employers in Jersey employ less than 5 employees. That said, around 60% of Jersey's workforce is employed by an employer with 21 or more employees2. If an employee does not wish to be re-employed, or a Tribunal decides that a direction for continued employment is not appropriate, then the Tribunal will consider how much compensation should be awarded to an employee (assuming his or her unfair dismissal claim is successful).

Level of Unfair Dismissal Award

The Tribunal has, at present, power only to award a fixed amount of compensation to an employee if (s)he had been unfairly dismissed. The amount of compensation payable is calculated using a table specifying the number of weeks pay which is awarded to an employee, with the amount varying according to an employee's length of service. For example, an employee with 10 months' service  would receive 4 weeks' pay as compensation for unfair dismissal, whilst an employee with more than 5 years' service would receive 26 weeks' pay as compensation.

This 'all or nothing' approach did have the advantage of ensuring that both parties knew the amount of compensation which would be awarded by a Tribunal if an employee sued successfully for unfair dismissal. Knowing the level of compensation available can assist the parties in understanding the risk and in reaching a settlement instead of going to the public forum of the Tribunal. However, such an approach has the disadvantage of leaving employers feeling aggrieved in a situation where the Tribunal finds that the reason for the dismissal was technically unfair (for example, the employer did not follow a particular procedure prior to the dismissal), even though the employee's poor behaviour had been serious enough to justify the employer's decision to dismiss.

Following the change in the Law on 1 October 2009, the Tribunal will still use the compensation table as a starting point, but it can reduce the amount of compensation awarded to an employee where it considers it is "just and equitable" to do so. The Tribunal can consider certain circumstances, including the conduct of an employee prior to the dismissal (where such conduct contributed directly to the dismissal).

The Guernsey Experience

The Guernsey Employment Tribunal already has the power to reduce the amount of compensation awarded to an employee who has contributed in some way to his or her dismissal. Indeed, in one recent case where a van driver repeatedly failed to follow his employer's reasonable instructions in relation to the delivery of food to customers, the Guernsey Employment Tribunal reduced compensation from 6 months' pay to only 2 months' pay because, even though there had been an unfair dismissal, the employee's poor conduct was largely to blame for the dismissal. It remains to be seen to what extent the Jersey Employment Tribunal will be prepared to reduce the level of compensation awarded; but it may choose to adopt a similar approach to that of the Guernsey Employment Tribunal.

Clearly employers are likely to welcome some aspects of the amendments to the Law more than others, and may have concerns about how the changes will operate in practice. Only time will tell how the Tribunal will use its new powers, but it is sure to be mindful of the interests of both employers and employees.

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