Without doubt, employers have in the past few years been subject to a deluge of employment legislation; many are still coming to terms with the ramifications. The two main changes concern the lowering of the qualifying period for protection from unfair dismissal from 2 years to 1 year (June 1999), and the much awaited increase from £12,000 to £50,000 in the compensationary limit for unfair dismissal awards (October 1999). Yet more legislation is on the way.
Human Rights
The spectre of the Human Rights Act 1998 that comes into force this October is rapidly approaching. This as yet huge and unexplored area of the law will have far-reaching and important consequences for employers in the UK. For example, I think it likely in the next couple of years that it will prove increasingly difficult for employers to undertake internal disciplinary hearings without witnesses being present. The overwhelming majority of internal disciplinary proceedings today are a "paper exercise" in terms of employers reaching decisions as a result of written witness statements from members of staff rather than witnesses being available for cross-examination. I believe these days are numbered.
Pendulum swings too far
Many employers feel that the pendulum has swung to such an extent in the employees' favour within the employment arena, that it is no longer a level playing field. Increasingly, it is up to employers to justify all decisions taken, if and when challenged in Employment Tribunal proceedings. Furthermore, Tribunals are increasingly flexing their muscles by making large awards both in unfair dismissal and discrimination cases.
This has led to employment liabilities coming to the fore as a business issue. For example, if a company is facing five unfair dismissal complaints, in theory at least, its exposure is £250,000. This can have a very real impact on a Company if and when it needs to secure additional funding or perhaps potentially gear itself up for a sale.
Insurers funding Applicants
Applicants are bringing claims supported by a variety of different bodies such as insurance companies. This is often on a "no win no fee" basis. Alternatively, a certain percentage of any settlement or award will be on a contingency basis. This is traditionally a third. The greater availability of options available to employees to fund potential litigation against their employers, coupled with the two main changes described above, has led to the massive increase we have seen in employment claims over the past 2 years.
For former employees who believe they have a claim, issuing Employment Tribunal proceedings is straightforward. They simply submit a written application to the Tribunal who will process the paperwork and send a copy of it to their employer. Unlike Court proceedings, no issue fee is payable. Whilst there is nothing wrong with this in principle, it does mean that the system is open to abuse.
No merit in claims
Employers are finding themselves facing applicants' claims which do not have particular merit but which are increasingly being brought purely so as to bring the employer to the negotiating table and encourage them to make a settlement offer. Employers often feel "pushed into a corner" because it is far more commercially viable to settle the proceedings no matter how unpalatable, purely because of the costs of fighting such cases and crucially, expending precious managerial time in dealing with the litigation.
Commercial settlements ignored by governments
This repeated scenario of employers faced with claims that they ultimately settle purely for commercial purposes is proving a real bone of contention and one that has not really been addressed by successive Governments over the years. So, what can companies do?
For employers who believe the applicant's case is weak, they can, under current Employment Tribunal rules, attempt to circumvent the proceedings by applying for a pre-hearing review. This is on the basis that the applicant's claim is unlikely to succeed and/or that their claim has no reasonable prospects of success. The Tribunal will consider both the written application of the applicant and the employer's notice of appearance. The utility, however, of the pre-hearing review procedure in weeding out unmerited claims is, in practice, limited by the fact that no evidence can be heard at this stage. If there are serious conflicts of facts in the pleadings, the Tribunal cannot properly judge what the prospects are. Furthermore, of course, the fact a pre-hearing review takes place involves the employer in additional costs in preparing for this hearing.
Costs
Nevertheless, if a Tribunal is prepared to conclude that the applicant's claim has no reasonable prospects of success, it can order the employee to pay a deposit (not exceeding £150) which must be paid within 21 days. If the applicant does not pay, he or she cannot proceed and the application is struck out. Another advantage of the pre-hearing review is that, if the applicant is ordered to pay the deposit and insists on continuing, he or she is "at risk" on costs. This means, if the employer is ultimately successful, he can apply for the applicant to be responsible for the employer's legal costs in defending the action in full. The extent to which Employment Tribunals throughout the country are prepared to do this, however, varies and, in any event, in practice rarely results in employees, if they insist on continuing, having to bear all of their employer's costs.
Adequate procedures
Employers need to be ever vigilant, therefore, in ensuring that decisions to dismiss are always taken carefully, that their contractual documentation is up to date and adequate procedures are complied with so as to limit their exposure to claims.
Lobbying needed
Furthermore, it is increasingly important for employers' organisations and, indeed employers themselves to lobby the Government to ensure that a more equitable regime operates. Provision should be made for example, that, if an applicant rejects a reasonable offer made by an employer to settle proceedings, they should be at risk of having to pay the employer's costs in continuing to defend the proceedings. These rules already exist in the Courts.
This real and live business issue should be on the priority list when it comes to lobbying Government bodies, particularly as we approach the next General Election and manifestos are being drawn up.
Many employers believe it is time to push the pendulum back a little and to ensure that it returns to its rightful place - in the middle.