Lords Back Review Before Scrapping Compensation Cap in Employment Rights Bill
The House of Lords has supported a Conservative proposal by a vote of 244 to 220 requiring a government review before removing the uncapped compensation cap in ordinary unfair-dismissal claims. Currently, compensation is capped at £118,223 or the amount of salary, whichever is lower. The proposed change would remove this cap and align the award with that of automatic unfair dismissal cases.
This change is a late-stage addition to the Employment Rights Bill and was not included in Labour's manifesto. It emerged following discussions between unions and business groups two weeks prior. The bill aims to enhance workers' rights across England, Scotland, and Wales, with provisions including sick pay and parental leave from day one, a ban on zero-hour contracts, and stronger rights to request flexible working. These changes do not extend to Northern Ireland.
Although the government initially abandoned the plan to implement day-one protection against unfair dismissal, they now intend to introduce it after six months of employment. Additionally, they have committed to removing limits on compensation for financial loss in ordinary unfair dismissal cases, making awards uncapped.
Tory peers argued that the review is necessary and that uncapped compensation would mostly benefit higher earners. However, crossbench peers criticized the timing and possible negative impact on businesses. Business groups have expressed reservations; the Federation of Small Businesses noted their concerns while Craig Beaumont stated that the plan was not previously discussed with them. TUC chief Paul Nowak described the continuation of votes on this matter as undemocratic.
The Employment Rights Bill is set to return to the House of Commons on Monday as the parliamentary 'ping-pong' process continues. Downing Street has stated that the government aims to pass the bill before Christmas.
