Legislation changes THE WAY OUT

From 1 June 1999 the qualifying period for protection from unfair dismissal has been reduced from two years to one year for all terminations of employment on and after that date.

For those dismissed before that date, it will still be necessary to show two years' continuous employment to achieve unfair dismissal protection.

The most obvious feature of the change to a one year rule is that more employees will now have protection from unfair dismissal. For those with only one year's service a dismissal will be unfair unless it is on one of the five specified grounds. These are:

* capability - in other words the ability to do the job;

* conduct - namely sufficient misconduct to justify dismissal;

* redundancy - where there is a true reduction in the manpower requirements for which the employee, or the category of employees to which he or she belongs, were recruited;

* where continued employment would be a contravention of law - such as a driver losing their licence and being unable to perform their job;

* `some other substantial reason' - not a catch-all, but a true business need justifying dismissal, for example where a third party customer insists upon the dismissal and that is clearly shown with the firm ultimatum that the contract would otherwise be lost.

Even if one of these grounds is present to justify dismissal, a dismissal must also still be fair. In other words, an employee must be warned of the possible outcome of any decision-making process, have the opportunity to attend and, in the future when further legislation is enacted later this year, the right to be represented either by a co-worker or a trade union official (even where the employer does not recognise a trade union).

They will then need to be consulted and their comments considered. Generally speaking, there should also be a right of appeal. Dismissal will only be a fair sanction if it is a reasonable sanction in all the circumstances.

The reduction to one year will require stricter use of probationary periods. It will be necessary to ensure a judgment is made well before the year is up as to the suitability of an employee. This will require proper appraisal systems, on more than a yearly basis for new joiners, and that these are properly implemented.

To avoid claims, it will also be necessary to have an enhanced appreciation of performance management. There will be a focus by all employment tribunals on the adherence to procedures. While a failure to follow an internal procedure can be explained away, as a matter of practice most tribunals will probably question the fairness of the dismissal.

Nevertheless, this development will undoubtedly lead to increased claims. The most recent ACAS report has demonstrated that every year the number of cases brought before tribunals increases on the previous year - at over 113,000 claims in 1998, this was more than double that in the last eight years.

When the compensatory award limit of £12,000 is raised to £50,000 later this year, there will be a real incentive for individuals to bring proceedings. Given that the compensatory award can be assessed on a more generous basis to include the loss of legitimate expectation, this would see enhanced claims to recover expected benefits such as stock options and bonuses.

That kind of figure will mean that termination of employment will need to be handled with care, to avoid expensive liabilities. The key for employers will be to avoid such claims by rolling out best practice to those with sufficient service, and making early judgments as to suitability before that one year threshold is reached. PE

Jonathan Exten-Wright is an employment partner in law firm Dibb Lupton Alsop.