The Government’s proposed income insurance scheme being described as “no-fault” may be misleading. Dr Simon Connell explores the proposed rules about worker responsibility for job losses.
The Government’s proposed income insurance scheme is being described as covering “no-fault job loss”, inviting comparisons with our no-fault accident compensation scheme.
But the proposed scheme isn’t no-fault in the sense that Accident Compensation Corporation (ACC) is, and it is important the Government rethinks this wording.
Worker fault is relevant because cover is provided when “the worker is not responsible for their loss of work”. Where this new scheme draws the line in holding a worker responsible deserves some close attention.
“No-fault” is usually used to describe accident compensation systems like ACC to contrast them with fault-based ones. In a fault-based system, for an injured accident victim to get compensation, they must identify someone else who is at fault. That person is held responsible for the injuries and must pay compensation. If the injured person shares some of the fault for the accident, that can reduce the compensation payable.
If you care about injured people getting help, then fault-based accident compensation systems are not very good, because they only provide compensation to a few injured people, for reasons mostly outside the injured person’s control. That’s why we have ACC. Aside from a few narrow exceptions, you get ACC cover regardless of whether you might be considered at-fault for your injury.
The proposed income insurance scheme, on the other hand, is based on providing cover when “the worker is not responsible for their loss of work”. Where the worker is regarded as being at-fault for their job loss, such as when they’re dismissed for poor performance, then there’s no cover.
That’s not a no-fault scheme the way ACC is. A pure no-fault scheme would recognise that the impact of unexpected job loss is the same regardless of the reason, and not discriminate.
Plus, the language of “fault” is unusual when someone can lose a job through resignation, which can be for happy reasons. People sometimes retire early because they’re in a good financial position to do so. That should not get covered by an income insurance scheme, but it is strange to say that they’re at-fault for resigning. It is better to leave “no-fault” for accidents and talk about whether the worker is responsible for their job loss (which the proposal also does).
So, when does the proposed scheme suggest that workers are or are not responsible for job losses? The scheme covers workers when their job comes to an end (through redundancy or the business ending) or when they can no longer work for health or disability reasons. It excludes job losses that are the result of resignations, and where the worker is dismissed for poor performance or gross misconduct.
But does this reflect when the worker should be held responsible, or not, for their job ending? One case to consider is that of voluntary redundancy. There’s an element of choice compared to other redundancies, but it’s made in the shadow of the redundancies that an employer might make if not enough people choose to go.
In some cases, taking a voluntary redundancy might allow a worker to effectively retire slightly earlier, which isn’t that different from the happy resignation I described earlier. But excluding voluntary redundancies would provide a disincentive for people to take them, which would be a bad thing, so I think they probably should be covered. This is an illustration of how worker choice and responsibility isn’t always straightforward.
I’ve already talked about the category of happy resignations, but what about unhappy resignations, when someone doesn’t really want to go? This could be for various reasons, including:
- ‘constructive dismissal’, which is where an employee resigns because of the employer’s actions, for example because the employer has acted so badly that the worker considers they cannot stay in the job;
- the worker considers that they cannot work for health reasons, but the employer did not agree on medical retirement;
- the worker cannot work full-time because family responsibilities have arisen, such as caring for an unwell family member; or
- the worker’s family is moving.
I’m not sure it’s fair to say that the worker is always responsible for resignations. In some cases, the worker’s voluntary “choice” is more real than others. Even in the case of dismissals, I’m not entirely convinced that a worker who has been dismissed for poor performance should always be treated as responsible. When someone is promoted to a role that it turns out they’re incompetent at, is that their fault, or is the employer partially responsible?
I don’t have a firm position on exactly where the lines should be drawn. But I do think we need to think carefully about when to hold a worker responsible for job loss. It’s best not to call this scheme no-fault, as it is based on a principle of responsibility.
