Companies try to avoid costly employment tribunals by settling out of court

Human resources departments are increasingly under pressure because of a surge in employment disputes, according Personnel Today’s exclusive survey.

Nearly half of respondents said they are more likely to settle out of court since the compensation limit was raised to £50,000 from £12,000 in October 1999.

Despite this 60 per cent of firms reported a rise in the number of cases going to tribunal over the past year.

There was a particularly noticeable increase – at least 70 per cent – among respondents from the service, local government and retail sectors.

The sum spent by the 137 companies surveyed on defending cases in tribunals was at least £1.8m.

Firms taking part in the research also paid out an estimated £700,000 on settling cases before they reached employment tribunals.

Dawn Tucker, personnel manager for Hull-based Nippress Continental, thought several developments could be attributed to the rising number of employment disputes.

She said, “It is a combination of factors: the increase in the upper limit of compensation from £12,000 to £50,000, the service time for employees (the length of time a person can be in a job before he or she can take their employer to an employment tribunal) being reduced from two years to 12 months and more than 200 changes to employment law have all given greater protection to the individual employee.”

Helen Gopsill, HR manager for food distribution firm Watson and Philip, has found an increasing proportion of her workload taken up with employment tribunals.

She said, “Half the problem is that a lot of what is alleged is not written down and it involves a lot of going back and forth to the manager.

“It will involve putting together introductory arguments, witness statements and background arguments.

“I think the increase in the number of claims has been quite noticeable.

“What I have noticed is that there has been an increase in claims from non-unionised sites.”

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Danny Davison, personnel manager for Ford motor dealership Patterson Ford, is convinced that the number of cases going to employment tribunals has risen over the past year.

He said, “There seems to be a belief that most companies will pay up before a case comes to tribunal.”

He stressed his company would not be one of them, despite the risk of having to pay out higher compensation since October 1999.

But he admitted that his firm would now give a second chance to employees who would otherwise have been sacked if there was any possibility of losing at a tribunal.

He added, “To keep the costs to a minimum I prepare all the cases. The majority of people pull out the day before or on the day of the tribunal. Some cases you know you are involved in a completely meaningless task and you will end up throwing all the work in the bin.”

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Roy Montag, group HR manager for Bradford-based Carpets International, believes the new compensation limit has encouraged employees to file more claims.

He said, “We have we have seen the number of claims double in the past year.”

His firm had been more likely to settle out of court because of the higher compensation limit but this policy has now changed.

He explained, “We have signed up with a company to provide employment law advice. We have an indemnity package where if we follow their advice they will defend us at tribunal.”

Employers fear compensation culture

The increase in compensation that can be ordered by employment tribunals has encouraged more staff to file claims against their employers, Personnel Today’s survey reveals.

Employers are increasingly reluctant to go to employment tribunals because of the risk of high compensation awards. They fear that employees are filing claims in the hope of a quick out-of-court payment.

Dawn Tucker, personnel manager for Hull-based Nippress Continental, said, “Employees know that if they go to a tribunal and lose it will cost them virtually nothing. They look at it with the attitude that they have nothing to lose.”

Peter Carr, personnel services officer for the Easington District Council, said, “We find it cheaper to settle rather than having to pay a solicitor a retainer for two days [at a tribunal]. I think the main reason for the increase in claims is because the potential for settlement is much higher. People have read they can get £50,000.

“The CBI said when [the new compensation limit] was introduced that it would encourage more frivolous claims and that seems to be the case.”

By Ben Willmott

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