Employment law is intended to eliminate discrimination – but in fact promotes it
In a recent failed employment tribunal against the Cabinet Office, and Simon Case as its head, the complainant claimed that “racism within the Cabinet Office appeared to be unrelenting and systemic”. These words are harsh, and if true, would have been a damning indictment of an important government department. But the complaint was withdrawn.
As a former chairman of a public company, I can attest to the corrosive effect of modern labour law on both employee and employer. From both perspectives, it encourages poor behaviour in the moral sense. How so?
In the tribunal involving the Cabinet Office, the employee had resigned and the Cabinet Office said that “no payment has been made, including in relation to the legal costs incurred”. But the situation concerning dismissals illustrates the wider problem.
The law as it stands is that, if an employer dismisses an employee, the dismissal is deemed in law as either “fair” or “unfair”. Unless an employer follows scrupulous procedures, dismissal is automatically “unfair”.
The use of the words “fair” and “unfair” is somewhat misleading, because they are legally defined, and may or may not represent most people’s judgment of what is actually fair or unfair behaviour. So “unfair” dismissal is unfair in the same way that Rwanda is now a safe country.
This matters because, if an employee can demonstrate that dismissal is unfair, they can sue their employer for compensation in an employment tribunal.
The law states that such compensation can be no higher than one year’s pay or £115,115 (since this month, it was previously £105,707) if lower. So nowadays many employers, particularly in relation to senior staff, will offer “unfairly” dismissed employees £115,500 as compensation, knowing that the employee will not sue them because they would receive no more money even if they win a full payout from a tribunal.
And in many cases, it is simply not practicable to put senior employees through the hoops of attempting a “fair” dismissal – you can’t put a CEO or senior director through a series of warnings and still expect them to act in the firm’s best interests at the same time.
But it is at this point that the Equality Act kicks in. If an employee can successfully argue that a dismissal is a result of discrimination against a “protected characteristic” (sex, sexual orientation, race, age, religion, disability and several more), then the compensation cap is lifted and compensation can be unlimited.
So a middle-aged able-bodied white male, who does not possess any notable protected characteristics, will find that the compensation offered is unlikely to be more than the cap, and he is well-advised (and will be advised) to accept this. But a female employee, an ethnic minority employee, or a gay or lesbian employee will be encouraged to think differently. There are armies of employment lawyers who know the law and will also be familiar with the behaviour of both employment tribunals and employers, and will encourage a discrimination complaint to break the cap.
But employers also know this, and they will naturally be keen to avoid the cost, expense and publicity of an employment tribunal, however vexatious the complaint might appear to be. So in many cases (and I know of several), employers calculate the likelihood of losing such a case (let’s say 50 per cent); the likely discrimination-based compensation (let’s say £500,000 for a senior employee), multiply the two together (maybe add a bit to get over the line), and offer the newly-ex-employee, say, £300,000 as a severance package before unfair dismissal proceedings are even contemplated.
With such an offer, the employee goes to his or her lawyer, who, if they confirm the above calculations, will suggest taking the package. Only if they think they have a much better than 50 per cent chance of success, or a possibly much larger pot, will they recommend a tribunal case.
Some biases in these decision-making processes may apply, as employers don’t want management distraction (and will pay quite a lot to avoid it), and lawyers want fees, and hence will encourage more litigation than is strictly logical. But the core principles above will apply.
So where does that leave the moral position? It leaves us with law that encourages employees to claim discrimination whether or not it has actually occurred. And to do so solely to exploit their legally privileged position for extra money.
For employers, their behaviour can be if anything morally worse. In the case of a senior dismissal, they will typically offer a settlement of £115,500 to white male employees, and more, sometimes much more, to everyone else. In short – they do discriminate – but against those who cannot shout “discrimination”.
