Employees taking cases to an employment tribunal should have to pay a fee in order to discourage spurious claims, according to the British Chambers of Commerce (BCC).
The BCC has called for an overhaul of the employment tribunal system, which it says is in "dire need of reform", with many companies settling cases instead of fighting them to keep costs down.
Figures released by the BCC showed that the average cost for an employer to defend themselves at tribunal is £8,500, compared to an average settlement of £5,400.
This proposal is expected to be considered by the Government as part of an ongoing review on a wide range of employment laws.
Dr Adam Marshall, director of policy and external affairs at the BCC, said: "The current system is perverse - forcing businesses to settle spurious claims rather than fight them, simply because it is more cost-effective for them to do so."
The calls follow those from John Cridland, director-general of the Confederation of British Industy (CBI), on the BBC's Today programme yesterday. He argued that the tribunal system is "broken" and said that a small refundable fee should be introduced for claimants.
"I don't know a single small employer in CBI membership that would take a case all the way through," he said.
However, the TUC has raised concerns that the introduction of fees would be unfair on some employees.
TUC general secretary Brendan Barber warned: "Low-income and vulnerable workers are more likely to face discrimination and already find it hard to challenge unfair treatment in the courts.
"Introducing fees would make it even harder to seek justice and would be a victory for bad employers that seek to exploit workers who they know cannot afford to fight back."
Read our in-depth analysis on the potential impact of introducing fees for claimants in employment tribunals.