A group of 6,000 employment lawyers has warned that a proposal to cut red tape by allowing micro-businesses to sack staff who have done nothing wrong will not reduce tribunal claims.

The Employment Lawyers Association (ELA) issued its warning as the government considers introducing compensated no-fault dismissals (CNFD) for micro-businesses, where the employer can dismiss staff without risking unfair dismissal claims in return for employees receiving appropriate compensation. The measure is designed to cut red tape and encourage employers to take on staff without fear of costly tribunal claims.

An ELA spokesman said that extending the qualifying period for unfair dismissal claims from one to two years for employees starting work after 6 April 2012 already makes it easier for employers to deal with underperforming staff. He said: ‘No-fault dismissal may further reduce unfair dismissal claims, but we could see an increase in different types of claim from aggrieved employees, for example under discrimination or whistleblowing rules. Further disputes might also arise around the definition of a ‘micro-business’ unless government prescribes precisely when headcounts are made.’

He added that the government’s own research reflects the experience of the ELA membership that dismissal and disciplinary processes are not a major concern for business and do not act as a brake on companies taking on staff. ‘But there is a danger that companies with up to nine employees may deliberately limit their own growth and expansion so that they can retain the ability to carry out a CNFD,’ he said.

He said that the ELA also believes the introduction of CNFD could make people reluctant to work for a micro-business, knowing that they would have less employment protection than with a larger employer and could be sacked at will.

Pre-defined compensation for a sacked employee should be set at an affordable level, but not so low that it could be seen as a ‘licence to ride roughshod’ over employees’ rights, he added.