Osborne’s Employment Law Reforms
Daniel Barnett argues why the proposed reforms to reduce employment claims will also be an own-goal for business.
3 Oct 2011, 17:00
Unfair law?
And of even greater impact, the government intends to introduce fees for bringing employment tribunal claims. These are rumoured to be £250 to start a claim, and a further £1,000 when applying for a hearing date. Large claims, of over £30,000, will have even higher fees.
The fees will be refundable if the employee wins, but forfeited if the employee loses.
The introduction of fees makes for a great headline. It is a massive deterrent for individuals, to the point where many will be unable to risk bringing perfectly legitimate claims. But ultimately it is a deeply distressing political initiative. It will prevent access to justice in many cases: by their nature, these fees will bite at exactly the time when an employee needs their money the most, ie when they have been dismissed.
The most expensive claims to defend are those brought by unreasonable litigants with unrealistic expectations. Such people are unlikely to be deterred by tribunal fees; they visualise piles of gold at the end of the litigation rainbow which will far outweigh the fees. They may be misguided, and even delusional, but that is nevertheless their belief and the fee will not put them off.
The fees are also likely to be a massive own-goal for business. 95% of employment tribunal claims settle, and it is almost inevitable that now employers will have to end up paying these fees back as part of the settlement deal. Employees can say, completely reasonably, that they will not settle a claim without the employer paying back the £1,250, as if they go to tribunal and win they would get it back from the Ministry of Justice – thus why should they settle for less? In smaller claims, say claims for unpaid holiday worth maybe £200, the employer is now going to have to pay the issue fee of £250 on top of the £200 in question in order to settle the claim.
It is also a disincentive to an early settlement of tribunal claims. Many employers will choose to wait and see whether the employee pays the additional £1,000 fee to set the case down for a hearing before taking a decision whether to make a settlement offer.
The average tribunal award is £4,000. To impose fees of nearly a third of the amount in question is prohibitive. The government will be charging as much as the no-win, no-fee lawyers that they claim damage business. It is difficult to understand the justification for a £250 fee to start a claim in a tribunal, when claims can be brought in the small claims court from just £25.
By contrast, the increase in qualifying for unfair dismissal rights from one year to two years is not a major change. That was the position for many years up until 1999, when it was reduced down to one year.
While the new provision is also hoped to discourage disgruntled ex-employees from bringing claims, raising the threshold will not necessarily reduce the number of employment tribunal cases. A cynic might say that raising the unfair dismissal threshold simply gives the employer an extra year in which to unreasonably dismiss an employee, but we are probably going to see a fall in the number of these types of cases getting to hearing. It’s not going to be dramatic, partly because employees who don’t meet the threshold still have lots of options open to them.
An employee with less than two years’ service will still be able to claim discrimination, unlawful dismissal and even certain types of unfair dismissal – those linked to whistleblowing, health and safety, maternity and trade union membership – which do not require any qualifying period.
The bad news for employers is that these sorts of claims tend to be the more expensive ones.
The new qualifying period is expected to come into force on 1 April 2012, although it is likely to encounter some challenges along the way. In 1985 the unfair dismissal threshold was raised from one to two years, before facing a backlash resulting in a pivotal House of Lords decision. A two year qualifying period was held to be indirectly discriminatory because fewer women than men were likely to be able to meet it. Two years became one in 1999. Now that the law has u-turned again, we’re bound to see similar arguments this time around.
Comments (6)
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My experience is completely different. Large companies are regularly targeted with claims of no validity, as they can be lodged in a few minutes. Any claim (whether valid or not) costs the company a lot of money (on barristers like you), and so no surprise that many are settled when the company knows they would win.
Putting a small barrier to entry will stop such abuse of the system.
However, I can see why an "employment barrister with Outer Temple Chambers" would be vehemently against. Perhaps downscale to a Lexus from a Mercedes?
03/10/2011 17:27We must have some deterrent against unreasonable claims, but I'm not convinced this is the way to go. Everyone should have the right to make a claim if they believe that they have been unfairly dismissed, and as you say, imposing huge charges at a time when they are unlikely to be able to afford them is hardly justice.
04/10/2011 00:01My reaction is that there should be some considerable tightening of the grounds on which one can claim unfair dismissal so making it harder to present a case. Like all ideas which are basically sensible, this has got out of hand by abuse and increasing the cost will not stop it as the abusers will ensure that they have the funds available.
I think the target of these reforms might not be the individual claimant, rather the pro bono solicitors and trade unions who do/will underwrite these claims. Whether it *will* do so may be debatable. I suspect the real problem is employers settling the cases before they get to tribunal rather than risk the vaguaries of the law, a phenomenon which is driving the rise of the compensation culture across the board.
04/10/2011 08:36The tribunal sysytem for employment claims is meant to be simpler and cheaper than the equivalent civil court system for other types of litigation.
However these proposed employment claim fees higher than the equivalent fees for similar value civil court claims. How is this justified?
04/10/2011 12:44George Osborne seems to want all Employers to treat their Workers as they were in this case http://tiny.cc/k7aep
04/10/2011 19:05I agree with Jules. Fees in the small claims court are considerably lower than the proposed £250 issue fee for an Employment Tribunal claim. Fast track and multi track cases generate higher fees but also have the bonus that the successful party's legal costs, as well as Court fees, which have been reasonably incurred in dealing with the claim, will be recoverable from the losing party. Until Employment Tribunals follow the same principle, then it cannot be fair to force a Claimant to pay out such a considerable sum of money at the outset of the claim, when, as Daniel has said in his article, they are most in need of that money having just lost their source of income.
That said, I understand that there will be a fee exemption for some and I await with interest what the criteria for these exemptions will be.
12/10/2011 13:08