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Are Employment Tribunals Working?

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Recent government proposals to reform the current Employment Tribunal system have led to heated debate over the balance of workers’ rights and increasing pressure on businesses in a time of recession. The Department for Business Innovation and Skills (BIS) has announced a consultation period on a string of proposals not least of which is the doubling of the qualifying period to two years for unfair dismissal claims and the introduction of an application fee to lodge a claim in the first place.

It is not long since the last major reforms (the so-called three step statutory disciplinary and grievance procedures introduced in October 2004) were abolished in April 2009 in favour of a revised ACAS Code of Practice to deal with dismissals and internal workplace disputes. However, an increase in the number of claims, many of which are thought by employers to have no real legal merit and brought simply to induce employers to settle, has led to the system being overburdened. We have experienced at first hand the increasing tendency for hearings to be postponed the day before due tio shortage of judges, leaving the parties high and dry and with an overwhelming sense of frustration, not to mention the wasted costs for many employers already struggling to cope.

In this regard, the British Chamber of Commerce (BCC) estimates that it costs employers an average of £8,500 to defend a claim compared with an average of £5,400 to settle. The figures show that around 58% of all claims are settled and as employers are extremely unlikely to be awarded their costs (the BCC claims that costs are awarded in less than 1% of all claims) there is every reason why employers would welcome the proposed changes.

However, the expectation that extending the qualifying period for bringing an unfair dismissal claim to two years will reduce claims may be misguided. This move could simply shift the problem elsewhere. It could lead to more people bringing claims under other heads, including whistleblowing and discrimination as these claims do not require a qualifying period. Many employees who perceive that they have been wronged are often advised to bring whistleblower or discrimination claims in place of unfair dismissal claims either because they haven’t the qualifying period to sue for unfair dismissal or they are not happy with the cap on compensation, particularly if they are a high earner.

In addition, such claims involving discrimination and whistleblowing tend to be more complex and take longer to resolve. This possible shift to more complex cases would have a knock-on effect on employers in terms of costs and reputational damage which is an additional feature of some discrimination claims.

From an employee perspective, many believe that an increase to two years would reduce access to justice for those who are particularly vulnerable. This view is also adopted in relation to the other major proposal which is the introduction of a fee to begin proceedings. On the other hand, if somebody wishes to bring a claim in the County Court, a fee is payable and therefore why should the position be any different in the Employment Tribunal? The introduction of a fee would, it is claimed, encourage people to focus on whether or not they really have and wish to bring a claim and this surely must be the key issue rather than the fee being another way to produce revenue to fund the system. The size of any fee will be a subject of hot debate and the range being discussed seems to be anywhere from £30 to £100.

As far as costs are concerned, in the Employment Tribunal, each side pays its own costs unless the panel is satisfied that there are “abusive, misconceived, vexatious or unreasonable” claims or conduct in the way in which these claims have been brought. The Tribunal has the power to make a costs order of up to £10,000 although such orders are extremely rare and the numbers have in fact decreased in recent years. Of course, the making of an award of costs is no guarantee (certainly for employers) that these will be recovered from the other party and in our experience, many employers will abandon the hope of recovering costs because chasing these through the County Courts simply adds to the overall expense and delay. Given the low number of costs orders made (last year the figure was 324 to employers and 88 to employees) out of a total number of claims of over £236,000, many will think that the proposal to double the cap on costs from £10,000 to £20,000 is rather pointless.

The BIS proposals also include additional and more flexible power for Judges to strike out weak cases and indeed for Judges to hear claims alone thus removing lay members from the system altogether. At present there are three members, two of whom are drawn from the public at large to strike an employer /employee balance.

Whilst it is not one of the proposals, there are some who believe that the proposed reforms are not radical enough and would suggest abolishing unfair dismissal law entirely and replacing it with a right to a fixed compensation payment which is triggered after a probationary period to be set by the employer. This is the view of the Institute of Employment Rights which argues that this would give both parties certainty over compensation and would also encourage employers to address performance issues before dismissing, whilst affording some degree of protection for employees.

Only one thing is certain and this is that whatever the final outcome, parties on both sides of the debate will have their work cut out for some time to come.

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