Recent legislative changes lead to a 56% rise in employment tribunal claims. An economic downturn, active unions and access to the internet making it easier than ever to make a claim means this trend will continue.
The current system cannot cope with the sheer volume of claims received. This fact, coupled with strong criticism from employers and practitioners, is what is driving the government's current focus on change. There is also a desire to promote economic expansion and recruitment by reassuring employers that taking on new employees is not such a big risk.
Proportionality in time and cost and the ability to deal robustly with frivolous or vexatious claims is what the business community have asked for. The government is seeking to deliver with a programme of reform.
'Weeding out' weak or vexatious claims
The existing 'strike-out' powers will become much more flexible. Claims may even be struck out on application by one side, without the need for a response or hearing. There will also be a procedure allowing employers to apply for a strike-out before submitting a full defence (ET3). However, employers should be aware that they do risk a cost order where they make unsuccessful applications for a strike out and safeguards have been proposed to avoid use as a default tactic by employers to deter claimants.
Reducing the cost
The government appears keen that it be made easier for claimants to be forced to put down a "deposit" against costs that may be incurred in defending their claim. They propose raising the limit on the maximum level of a deposit from £500 to £1,000. These are positive developments for employers. However, deposit orders are very rarely made and the tribunal is required to take into account the claimant's ability to pay before making such an order. Even where currently used, deposits are often towards the very low end of the spectrum (eg £100 to £250).
There are proposals to increase the limit the tribunals can award on costs (in favour of either party) from £10,000 to £20,000. Again, the reluctance of tribunals to use their current powers against unsuccessful claimants may negate any positive impact of such a move for employers.
A formalised process for making settlement offers may be introduced. This would enable a tribunal to increase or decrease awards where offers of settlement have been unreasonably refused.
Early (pre-claim) resolution of disputes
Where the existing pre-claim conciliation mechanisms are used only one third of potential claimants go on to make a claim. Under the proposed changes, all potential claims will have to be lodged with ACAS within the ordinary time limit. During a fixed one month period ACAS conciliators will try to broker a resolution. If this is successful, no claim will be made. If the parties decline to conciliate or if the conciliation is unsuccessful then ACAS will issue a certificate confirming that the period has been completed. The claimant will have to submit this certificate to the tribunal with their claim. This would work well for employers who wish to nip valid claims in the bud with a reasonable offer of a commercial settlement. There are fears that this scheme could end up being simply another delay which draws out the process further for all parties.
It could be seen as a barrier to the submission of claims and it does complicate the rules on time limits. This complexity may deter some claimants and catch others out, so this scheme may have the effect of reducing the number of claims submitted.
Others measures designed to promote the focusing of the parties minds at an early stage include:
- greater detail required on claim forms;
- claimant required to submit schedule of losses with initial claim so employers can better assess the risk; and
- provision of information to parties (average awards made by the tribunal for claims of the relevant type, information about the tests which the tribunal will apply and remedies they can and can't award).
Shorter hearings and a more efficient system
Increasing efficiency in the tribunal system is the less controversial and glamorous part of the recent package of announcements. However, it is the most important. If the government gets this reform right (and sifting out meritless claims, speeding up listings, minimising cancellations and adjournments and reducing hearing length is a very good start), it will restore the credibility of the system.
Fewer claims
They propose to increase the qualifying period for an employee to obtain unfair dismissal rights. This will mean an employer has more freedom to dismiss an employee if their performance is poor or the business faces a downturn. Currently, any dismissals after 12 months service can be subject to challenge. The proposal is to extend the qualification period to two years. The government estimate up to 4,700 fewer claims per year would be made in the employment tribunals as a result. This might be true but straightforward unfair dismissal claims made by short serving employees are not the sort of claims that keep most employers awake at night. It is the more complex, expensive and damaging claims of discrimination and automatically unfair dismissals (none of which will be affected by the increased qualifying period) which pose the greatest risk to employers.
The introduction of fees to lodge claims would be popular with employers (equally unpopular with unions) but practically it is unlikely to discourage many claims. It might cause the ambivalent unrepresented employee to think twice about 'having a punt' in the hope of a 'nuisance value' settlement. The "no win no fee" brigade will adjust their business model to minimise the practical effect (eg by offering rebates or insurance products) to effectively remove the barrier to potential claimants. This measure is controversial in a political sense and, no doubt, the separate consultation planned for the Spring will generate much debate. However, it is unlikely to dramatically change behaviour of claimants or the number of claims being received in practice.
Increased penalties for employers
Employers who lose at a full hearing may find themselves paying a fine of up to £5,000 to the treasury as a punitive measure for their breach of employment legislation. This would be in addition to the compensation to the claimant. This will be a factor for employers when assessing the risk of a claim and is likely to encourage offers of settlement.
In summary? More good news than bad news for employers. We will have to wait to see if these ideas bear fruit. The consultation is due to close in the Spring. There will then be a period of review and reflection. The mechanics of changing the rules will then kick in, including transitional periods to allow everyone to adjust to the new position. So, employers may have to wait quite some time before they reap any benefits.
Main Source: BIS Consultation Paper – Resolving Workplace Disputes: A Consultation (January 2011)
See also: 'Going legal' by Michelle Gray in The People Bulletin, 21 January 2011