The new arbitration scheme from Acas is designed to stem the rising tide of
tribunal cases. But there are fears that they could actually lead to an
increase in formal procedures. By Philip Whiteley
From this autumn an employer embroiled in a dispute with a member of staff
will have a genuinely new option. Some 18 months late, the individual
arbitration scheme will finally come on stream.
Whether large numbers of aggrieved employees will shun the limelight of the
courts and disappear into a private room to settle their differences remains to
Arbitration will be binding and confidential with no chance of appeal. It is
not a soft option. The maximum £50,000 limit on compensation available in tribunal
claims will apply, and arbitrators will be able to order reinstatement of a
But it is closer to the original tribunal concept of an informal settlement
without reliance on legal precedents. Arbitration service Acas, which devised
the scheme, is now quietly confident it will take cases out of the court
It badly needs to. With the quadrupling of the maximum award for unfair
dismissal and the growth of employee rights, cases have soared. Latest figures
indicate that there were 164,000 cases lodged between April 1999 and March
2000, compared with around 125,000 for the year before.
The tribunal service has been busy creating eight new tribunal rooms for
London and the south-east at a new site in Watford. Hearings started at the new
rooms this summer.
Trade unions have been using the growing number of individual rights
pragmatically to compensate for a loss of collective force. Last December the
TUC proudly highlighted the record £14.3m it won in compensation for its members
There is political pressure for the scheme to work. Next year is general
election year and the Conservatives are keen to show that Labour has overseen
growing workplace confrontation. As well as the increase in individual cases,
TUC figures in June showed a sharp increase in ballots for industrial action,
which were seized on by Opposition spokespeople.
And there are indications that employers and unions are prepared to give it
a fair wind. Some employers may find the absence of an appeal unattractive,
says Jerry Gibson, assistant director operations for Acas. "But the
informality of the hearings, the fact that it is an industrial relations
solution as opposed to a legal decision-making process, and the fact that it is
confidential may be attractive. That is the view that I am getting from both
sides of industry and from the legal profession."
He adds: "Our view is that if you cannot settle the claim in some way
then there will be a tribunal hearing or arbitration. Both of those have
various factors; some may make one system more attractive than the other."
The legal profession is getting in on the act, too. The Employment Lawyers
Association has set up a working party on alternative dispute resolution to
investigate its potential benefits and consider the types of claims best suited
to it. The group, consisting mainly of lawyers and professional mediators as
well as an Acas representative, aims to come up with a practical ADR policy of
Julie Quinn, deputy chair of the ELA and senior associate at law firm Allen
& Overy, comments: "Currently, the majority of cases brought in
employment tribunals are the result of employer/employee relationships having
irreparably broken down. ADR will give both parties an opportunity to resolve
their disputes more quickly in a private and less adversarial forum."
Some commentators see a danger, however, that claimants could pursue the new
procedure as an alternative to an out-of-court settlement, rather than as a
replacement for tribunals.
Willy Coupar, director of the Involvement & Participation Association,
and chair of the DTI’s Partnership Fund, argues that there could be an increase
in formal procedures, not a fall.
"A very large number of complaints never get to tribunal," he
says. "They are either resolved through Acas conciliation, are withdrawn
or are settled elsewhere. It is likely that the arbitration process will draw
in many of the cases presently resolved elsewhere."
He points out that the threshold for a case to cross before reaching court
is higher than that for an arbitrated settlement. "There are issues like
the balance of probability of success; how much financial support you have, and
the willingness of people to grind it out."
The reason for the surge in cases is not so much to do with the state of the
law or the attraction of tribunals, he argues, as much as the fact that the
employment relationship has been individualised, and people are more accustomed
to dealing with lawyers.
"Thirty or 40 years ago, for 95 per cent of the workforce, the idea
that the law could be used to resolve workplace matters would never have
crossed their minds. They would have thought only of a trade union,"
"Now, many more people are familiar with the law; more have had
divorces and they have bought houses. Lawyers are far more part of everyday
Around one million people each year seek help from a Citizens’ Advice Bureau
about a problem at work. "You ain’t seen nothing yet in terms of the
growth of use of the law," says Coupar. "Growth will continue.
Arbitration will add another option."
Elaine Aarons, chair of the ELA and an employment partner at Eversheds,
points out that people now seek legal advice at an early stage in the process,
whenever there is a workplace dispute.
"Far more cases involve lawyers on one side or the other – it used to
be the minority, now it is the majority," said Aarons. "One of the
parties is going to take legal advice at an early stage, and the advice they
are going to get is that there is an inevitable unpredictability in the outcome
The uncertainty is caused by the absence of legal precedent. Employers will
have to balance legal fees of perhaps £5,000 to £10,000 against maximum unfair
dismissal compensation of £50,000, and gauge whether the pay-out is more or
less likely in a tribunal.
"Also, it is very often the case that one of the parties actually wants
the matter to be heard in a public forum, because they want to clear their
name," says Aarons. "An employee often sees publicity as one of the
strongest cards, as it can be potentially damaging to the employer’s
Coupar advises Acas to target its new procedure at the disputes for which it
is most suited – primarily those such as contractual and severance issues. In
these cases matters are primarily factual, rather than a test of reasonableness,
and can benefit hugely from an independent arbitrator.
Case study: An individual solution
Many employers are realising the way to deal with the tribunal problem is
through a fundamental review of employee relations, rather than tinkering with
grievance and disciplinary procedures.
An analogy can be drawn with managing customers, where complaints procedures
are used to improve service. Similarly giving a fair hearing to aggrieved staff
can inform and help the management of others – a point underlined in Acas
Armed services caterer Naafi has taken a lead. An agreement finalised in
June with the union MSF allows for binding arbitration in collective issues as
an alternative to industrial action, and an extra high-level review of each
contested case before it reaches tribunal.
If the MSF, having reviewed the cases, agree that the process has been
handled effectively they undertake not to represent the employee at a tribunal.
The organisation recognises it cannot waive an employee’s statutory right to
seek redress in tribunals, but the objective is to minimise the number of cases
going that far.
"We have one eye on what we expect to be an increasing tendency to go
to tribunal," says Naafi HR director Mike Nicholson. "We have seen an
increase in numbers because awards have gone up to £50,000; with discrimination
cases there are no service length criteria. We saw there was potential for the
volume of cases to increase and the cost and time could be very large."
Nicholson accepts there have been times when managers have been too ready to
dismiss someone. "What we want is consistency of treatment. With the best
will in the world, when there are different cases in different parts of the
world, there will be differences. This is to act as a filter; to look at a case
in relation to other cases."
But he adds, "We’re not just talking about problem staff and
disciplinary cases. We see this as integrated into the management processes. We
do not believe that strikes have any place in modern, forward-thinking
business. On the other hand bullying, harassment, and treating staff badly have
no place either."
Nicholson would look favourably at statutory arbitration in the event of
Naafi’s internal procedures failing to resolve a dispute. "We would
certainly consider using that, though our whole emphasis is on trying to
resolve the matter internally."
Before pointing the finger at statutory procedures and demanding
refinements, employers might reasonably be expected to follow Naafi’s lead in
ensuring that their own processes honour the principles of fairness.