Employment tribunals: proposals may save money but at the cost of justice

Employment lawyer Kevin Poulter argues that proposed changes to employment tribunals may well reduce access while failing to stop high payouts

Chancellor George Osborne has announced changes to Employment Tribunal system, which he claims will save UK business £16m each year. 

The proposal is in two parts. 

24-month qualification

Initially, and without consultation, from April next year, the length of time an employee must accrue before they qualify to bring a claim for unfair dismissal will extend from 12 months to 24 months, limiting the claims of millions of employees just starting out in their careers or getting back into the job market after being hit hard by the recession. Osborne suggests that the extension will encourage businesses to employ more people without the fear of significant financial claims by vexatious litigants or those just not up to standard.

However, if a business is unable to determine the effectiveness of its employees within 12 months of recruiting them there are likely to be other problems within the business that need to be addressed.

Up-front fees for cases

The second proposal, expected to go to consultation by the end of November this year, will see the introduction of a £250 fee to employees upon issuing a claim with the Employment Tribunal.   Fees will be even higher for cases where damages of more than £30,000 are sought, although “poor” claimants will either not have to pay the upfront charges or have the fee reduced. How “poor” will be defined is yet to be discussed. A further fee of £1,000 will be due when that claim is listed for a hearing. 

There is likely to be a widespread criticism of the proposals. Already the unions are labelling this two-pronged attack an erosion of workers’ rights. Also, with the legal aid budget already reduced beyond a minimum, there are serious worries about access to justice for those who most need it.

Of course, as with the current court system, if the employee wins their claim the fees are returned to them. A real concern for claimants is where the claim is perfectly valid but of low value.  Those issuing a claim under the minimum wage legislation, for example, are not cash rich and would be unable to afford the significant up-front fees. 

Spurious and costly

The changes are likely to be implemented in some form, even if that evolves from the current recommendations as a result of the consultation. The fees are expected to become a reality in April 2013, which means there will be a year where complex and arguably spurious claims will be raised in the tribunals as employees (and their lawyers) attempt to circumvent the extension to claiming unfair dismissal and beat the deadline. For example, there is no minimum qualifying period for bringing a discrimination claim and at present there is no suggestion that will change. 

However, discrimination claims are often complex and will undoubtedly cost businesses more in defending them. Claims for age, sex, race or other discrimination that otherwise would not have been considered factors in an unfair dismissal claim will surely rise. There may also be an increase in whistle-blowing or health and safety claims, which have no minimum qualifying period but are costly in terms of both financial and human resource to defend properly. What’s more, damages in discrimination claims are uncapped, unlike straightforward claims of unfair dismissal.  Where an employee is successful in a discrimination claim, the financial award will usually be significantly greater. 

Of course, as a lawyer I have to declare an interest. But by introducing a claim issue fee, even for most valid of claims, there will be a reluctance to spend more money on using a solicitor or other legal advisor. This will not only increase the administrative burden on tribunal staff but also employment judges in managing unrepresented claimants, both in and out of the hearing, but also the time spent by lawyers in defending claims on behalf of their commercial clients. 

If these changes are to save businesses money, which I am yet to be convinced of, those savings will be negligible.   

Commenting on the reforms, Business Secretary Vince Cable said: “We have one of the most flexible labour markets in the world.” Surely this should be celebrated rather than derided and diminished by what currently appears to be a short-sighted government looking to gain favour with its more powerful supporters at the expense of the grass-roots electorate.