Putting the ‘red tape’ debate in context

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Employment regulation v job creation and growth? The ‘red tape’ debate has sprung into life again. On the one hand, there are question marks over why the Equalities Act 2010 is featuring on the government’s ‘Red Tape Challenge’ website. At the same time, controversy is rife over the CIPD’s recent report, The Economic Rights and Wrongs of Employment Regulation, which states that ‘the idea that employment regulation is always and everywhere “bad” – and deregulation therefore correspondingly “good” – is as simplistic as the opposite idea that regulation is always the best way to promote job creation or boost workplace productivity’.

But whilst the debate continues let's not lose sight of the other element to any employment regulation: the courts' and tribunals’ role in interpreting it. Recent cases have shown a pragmatic judicial approach: potentially excellent news for employers in key areas such as dismissal, redundancy and calculating compensation.

Firstly, a familiar issue for tribunals when interpreting unfair dismissal legislation: assessing whether dismissal is within the range of reasonable responses of the employer without simply substituting their own view for that of the employer. In two recent cases the Court of Appeal recognises ‘what are … sometimes, difficult and borderline decisions in relation to the fairness of dismissal’, and tells the Employment Appeal Tribunal (EAT) to pay ‘proper respect’ to tribunals’ decisions, as Parliament has entrusted them with the responsibility for assessing the facts and being the chief arbiter of whether a dismissal is in fact fair. The Court of Appeal also warns the EAT to read tribunal judgments in a ‘fair, reasonable, and sensible way, in [their] proper context and in the round’, and not to the point of producing ‘pernickety critiques’ (see Bowater v North West London Hospitals NHS Trust and Fuller v London Borough of Brent).
 
Secondly, the EAT has recently provided some comfort for employers carrying out redundancies. Tribunals should, said the EAT, only investigate redundancy selection scoring where there is an absence of good faith or obvious error. Also, the emphasis should be on the overall fairness of the redundancy process: where no employee representatives are elected in a collective redundancy situation, individual consultation will not always be necessary so long as the process is fair. Nor does consultation have to occur before the redundancy scoring exercise where the employer states that that exercise is provisional and subject to consultation (see Dabson v David Cover & Sons Ltd).

Finally - and particularly topical given the current debate over discrimination awards and the government’s expressed wish to find some way of capping them - the Court of Appeal has decided that when assessing loss in a discrimination claim, losses should be awarded up to the point when the employee would be likely to obtain an equivalent job, not when it can be sure the claimant would find an equivalent job (see Wardle v Credit Agricole Corporate and Investment Bank). Therefore awarding full career-long losses will only occur exceptionally where, as a result of discrimination, there is no real prospect of the employee ever obtaining an equivalent job. The Court of Appeal has thus allayed fears regarding the reach of discrimination compensation following its 2009 decision in Abbey National v Chagger. Mr Chagger brought evidence that he would never again obtain employment in the financial services industry due to the fact that he had brought discrimination proceedings against his former employer, and was awarded £1,325,322 future loss. The Court of Appeal now confirms that this is the exception as opposed to the rule.

So, whatever the outcome of the ‘red tape’ debate, employers should be reassured that the courts, at least, are taking a pragmatic and balanced approach.