News analysis: Who should pay tribunal costs?

With employment tribunal claims and payouts soaring, it is little wonder that many HR professionals are eager to take controversial measures to slash the number of cases reaching this stage.

Awards for unfair dismissal, religious and sexual orientation discrimination and equal pay claims rocketed in 2006-07, the Sunday Telegraph reported earlier this month.

The total amount awarded at employment tribunals reached a whopping £32m, £7m higher than 2004-05. Meanwhile, the number of claims lodged climbed from 132,600 in 2006-07 to 189,300 in 2007-08 according to separate figures (see box).

Gathering momentum

However, many employment bodies have been alarmed by the momentum gathering for employees to be made to pay employers’ costs when they lose a case at tribunal.

The idea was put forward by Conservative business secretary Alan Duncan in an interview with Personnel Today (11 November). It was swiftly supported by HR chiefs, with Helen Giles, HR director at homelessness charity Broadway, saying the threat of paying costs would be a “huge deterrent” to those looking to bring spurious claims.

Joanne Monk, people and development director at conference sites firm De Vere Venues, has since backed the idea. She told Personnel Today last week: “The current system is weighted too heavily in favour of the employee, so people make claims without having any evidence to back them up.

“If this proposal made people think twice about putting in a claim in the first place, that would be a good thing. At the moment, it’s too easy.”

Caroline Price, HR director at photographic firm Canon UK, was more cautious, insisting early resolution was the best policy to stop cases reaching court. But she added: “In circumstances where serious attempts at resolution have been made but have failed, I think it is then appropriate to award costs against an employee for any unsuccessful claim brought to tribunal.”

Employment judges already have the power to order costs to be paid by a claimant, depending on the circumstances of the case, and if a claim is deemed to be vexatious by the judge, the other party can make an application for costs. But such powers have rarely been exercised.

Risky business

Mike Emmott, employee relations adviser at the Chartered Institute of Personnel and Development, labelled Duncan’s proposal “draconian”, arguing it would make it too risky for many genuine people to seek redress.

“Such a proposal is borne out of employer frustration and irritation at some of the claims that come to court, but it isn’t a practical proposition,” Emmott said. He also doubted the Tories would follow through with the proposal if they came to power.

Concerns that the proposal would hit the most vulnerable workers the hardest were raised by the Institute for Employment Studies.

A spokesman at the think-tank explained: “If you are a high-flier in the City earning £70,000 a year, and you might have to pay £5,000 in costs, you are unlikely to be deterred from making a claim. But if you’re a blue-collar worker earning between £10,000 and £15,000 a year, you wouldn’t dare take the risk.”

Sarah Veale, head of equality and employment rights at the TUC, agreed. She said: “I can see why the Conservatives have been tempted to suggest this, but it works on the premise that all employees are both highly intelligent and vindictive against their employers. However, all the research shows that the people involved in tribunal cases are often vulnerable, unsure of their rights and rather desperate.”

Early intervention

The government has repeatedly stood firm against the proposal. A spokesman for the Department for Business, Enterprise and Regulatory Reform reiterated there were no plans to change the law.

Instead, the responsibility for reducing claims resides, for now, with Acas. A funding boost of up to £37m will help the conciliation service tackle disputes earlier, and employers will be encouraged to follow its new code of practice for handling such conflicts under the forthcoming Employment Bill.

Emmott conceded there was too much emphasis on tribunals as the preferred vehicle for employees to resolve workplace feuds. He said: “HR clearly has a role to play, intervening if the parties can’t resolve an issue, and improving the performance of line managers.

“But the high number of tribunal cases isn’t down to the failure of HR it is a much wider organisational issue.”

Employment tribunals – the facts

189,300: the number of claims received by the Employment Tribunals Service in 2007-08, compared with 132,600 claims in 2006-07

39% of employers have faced at least one tribunal claim in the last 12 months

26% of claims were settled out of court by employers who were advised they were likely to win at tribunal

44% of employers believed weak or vexatious claims had increased over the past year

Source: CBI/Pertemps employment trends survey 2008 and the Employment Tribunals Service

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