Employers face costs of thousands of pounds from spurious employment claims, the British Chambers of Commerce (BCC) claimed yesterday.
Tribunals are “overwhelmingly weighted in favour of the employee,” causing companies to pay large settlements even for claims with no substance, the BCC’s report said.
The average cost for an employer to defend themselves at tribunal is £8,500. However, the average settlement is £5,400, often making it cheaper for employers to settle.
Three in four employers that settle say they have done so to reduce costs or because it is more convenient than lengthy legal procedures.
“Currently, tribunals are too slow,” said Dr Adam Marshall of the BCC. “Ministers must commit to reducing the wait time for a first hearing — and making the system less of a barrier to business growth.”
Statutory disciplinary and grievance procedures have provoked a culture change, encouraging litigious behaviour, according to employment lawyer Pam Loch of Loch Associates.
Filing a complaint is as easy as completing an online form, she said. Unrepresented or badly informed employees often demand their “day in court” and procedures drag on as judges guide claimants through legal complexities – increasing legal costs to defendants.
And hardly any companies are able to reclaim costs, despite winning cases, the BCC reported. The amount of cases in which reimbursement is paid is close to 0.15 per cent, they said.
Judges could weed out spurious claims to stop wasted time and expenditure, and require claimants to lay down a deposit, Loch suggests.
Regardless of whether or not the employer is at fault, it is all too often so much easier for an employer to settle out of court using a compromise agreement.
Im my experience and speaking with fellow HRDs, a typical unfair dismissal claim will cost £10k to defend and a discrimination claim £20-30k to defend. How many SMEs have this sort of budget to defend nuisance claims (for the principle of doing so) and then the prospect of paying out compensation (as claims are often skewed in the employee’s favour!). HRDs have tobe commercial ultimately and it is a shame that many employers are forced to to settle out of court when more often than not they are quite clearly they are not fault!
ETs should proactively weed out nuisance claims and start saving everyone involved in them a lot of time and expense!
Advice for SMEs is to implement effective employment documents, policies and procedures and ensure your line managers understand your employment policies. It’s worth spending some money training line managers to avoid costly payouts later!
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