UK Government proposals could persuade businesses to settle more employment claims pre-tribunal, says Eversheds
Of particular concern for business is the Government's proposal to introduce fines for employers found by an employment tribunal to have breached employment rights. In addition to any compensation awarded to the successful claimant an employer would have to pay a penalty to the Government of 50% of the value of the compensation. There would be a minimum penalty of £100 and a maximum of £5,000. Six in ten respondents believe that as a result their organisation would settle more claims before they reach a tribunal hearing.
Other key findings from the study include:
• 91% of employers support the proposal to introduce a "formal offer" system whereby any compensation awarded by a Tribunal may be increased or decreased if the other party declined to accept a reasonable offer of settlement. If no award of compensation were made, the Tribunal might make a costs award against the part who refused the offer.
• 83% of employers support the introduction of fees for lodging employment tribunal claims
• 78% of employers believe that raising the unfair dismissal qualifying period from one year to two years would result in a drop in claims
Owen Warnock, partner at Eversheds comments:
"Many of the aims and sentiments contained in this consultation paper clearly strike a chord with employers. It is clear that the Government is keen to ensure that more employment cases are settled without a Tribunal hearing. Our study has however indicated that many employers considered that the proposal to fine employers found to have breached employment rights could improperly increase the pressure on them to settle claims rather than defend themselves.”
On the other hand, the “formal offers” idea is welcomed by employers. Owen Warnock says:
“One of the most radical suggestions, which is intended to encourage parties to be realistic about their cases, is to introduce a "formal offers" system. This would put a party at real risk of an adverse adjustment to the compensation awarded, or a costs penalty, if that party had declined to accept a reasonable offer of settlement. An overwhelming 91% of respondents supported this proposal and an additional 2%, (93% in total) feel that their organisation would make use of it.”
Much of the publicity for the proposed reforms has focused on raising the unfair dismissal qualifying period from one to two years. Although only 35% of respondents felt that extending the period to two years would make their organisation more likely to offer employment, an overwhelming 78% thought that extending the period to two years would result in a drop in claims.
When asked about the introduction of fees for lodging employment tribunal claims, a measure aimed as a deterrent to "have a go" claimants, more than eight in ten employers (83%) supported the proposal.
On the question of what level of fee would be appropriate, there was no clear consensus. The highest number of responses (32%) favoured a fee between £251 and £500, with 26% favouring a fee of between £1 and £250. 19% favoured a fee of between £501 and £750 and 14% between £751 and £1000. Owen Warnock continues:
“Whilst the Government has postponed the fees issue for another consultation on fee charging later in the year, it will be interesting to see what provision the consultation proposes for unemployed claimants with no money. No doubt there will be some stakeholders in the Tribunal system who will argue that respondents should also have to pay a fee in order to defend a claim.”
The Government has also sought to canvas opinion on how greater use might be made of alternative dispute resolution tools such as mediation. The consultation seeks to obtain information about current use, costs and benefits, as well as barriers.
Eversheds asked employers firstly whether they used workplace mediation, either through internally trained mediators or independent third party mediators, to resolve individual disputes. Less than half of employers who responded (44%) currently use workplace mediation, though 27% feel it is a successful tool for resolving certain employee disputes. 21% said they would encourage other employers to use it and 15% felt that mediation provides direct cost savings by increasing employee engagement.
The study found that the most common barrier to using workplace mediation was cost, with four in ten citing this as a factor. A total of 34% of respondents also felt there was a lack of information and guidance on mediation. However, 13% of responses indicated that the employer had tried mediation before but it had proved unsuccessful and this experience was therefore a barrier to future use.
Owen Warnock concludes:
“Employers need to respond to the consultation in detail to ensure that their views are taken into account. It is important to ensure that the Government's wish to tackle the perceived "stick in a claim" culture leads to reform which is effective, fair on all parties, and simple in practice. It is vital that we avoid the disaster of the statutory disciplinary and grievance procedures introduced in 2004 - which were repealed to everyone's relief four years later."
The research carried out by Eversheds, was completed by 632 respondents who represent organisations employing more than 2million people. Responses were gathered during March 2011.
