Long-awaited changes to the tribunal system have been met by the Employment
Bill, but will the measures be able to tackle the spiralling compensation
culture? Mike Broad reports
Employers have been waiting a long time for the changes to the employment tribunal
system that are included in the Employment Bill.
As tribunal applications have continued to spiral, employers have had to
spend more time and money dealing with them – the CBI claims that employment
tribunals cost business £633m a year.
The latest figures released by legal firm Peninsula show that compensation
culture is getting worse – tribunal applications in the UK rose from 118,400 in
2000 to 128,406 by the end of 2001.
The Government’s tribunal measures – which should be introduced later this
year – are trying to foster a ‘prevention is better than cure’ approach.
Employers will be required to provide staff with up-to-date statements of
employment terms, and introduce minimum internal disciplinary and grievance
procedures. And when the work relationships break down, a fixed period of
conciliation will be used to seek a resolution prior to tribunal.
The consensus among tribunal experts and HR professionals is that the
measures are a step forward. Nichola Fenny, policy adviser for the CBI, said:
"We are happy with these proposals – employment tribunals have been a
costly problem for business.
"If staff fail to use internal grievance procedures and go for a
tribunal application straight away then any resulting award can be cut by up to
50 per cent."
This, of course, applies to employers as well – employee awards will
increase significantly if the employer fails to try to solve the problem
The internal procedures will also be more formalised, with staff having to
inform their organisation of a grievance in writing, giving the employer 28
days to respond and attempt to resolve the issue.
Peter Done, managing director of legal firm Peninsula, believes the measures
could dramatically affect the number of tribunal applications from staff in
SMEs, as long as the resulting regulations are understandable.
"There are many firms that have very little in the way of internal
grievance and disciplinary procedures. Now they will have no choice but to
implement them," he said.
"If the regulations are workable and firms get decent advice, then the
number of tribunal cases are bound to fall – there is nothing like the prospect
of paying out more cash to focus the mind."
Trade and Industry Secretary Patricia Hewitt claimed in December that the
Employment Bill reforms will cut the number of applications by up to 30 per
cent – or 40,000.
But many question whether the measures will dent the seemingly inexorable
rise of the compensation culture.
Mike Emmott, employee relations adviser of the CIPD, believes the continued
growth in employment law will drive up tribunal applications. He explained that
the combination of existing law – such as working time and disability rules –
and future legislation, such as the EU directive on temporary workers, will fuel
a rise in claims.
"The spirit and intention of the tribunal reform is right. But will the
changes result in a one-off fall? I don’t think so," he said.
Vexatious claims have to be tackled to help address the problem, said
"The president of the Employment Tribunal Service has to make it clear
to its chairmen that if they think applicants are taking people for a ride,
they have to penalise them through existing legislation," he said.
Last July, laws were introduced to allow tribunal chairmen to charge a
deposit of £500 for weak claims to be taken forward. They were also given the
power to award costs against vexatious claimants.
The workability of the new internal procedures have also been questioned.
Sue Nickson, head of employment law at Hammond Suddards Edge, believes they are
too complex for employers.
Individuals have three months to lodge a claim for unfair dismissal, for
example, but the new procedures and fixed period of conciliation, will lengthen
the period of deliberation between the aggrieved and the employer.
Clarification is needed in the resulting regulations to work out how the two
time periods interrelate, said Nickson.
The most effective proposal for cutting tribunal applications would have
been to charge applicants for lodging a complaint. It was raised in the
original consultation paper Routes to Resolution in October and received
widespread support including that of the CBI and CIPD. But the idea of charging
disgruntled members of staff £100 or so to place an application was met with
union outrage and was subsequently dropped.
Other legal experts are advocating a tougher approach to cut the burden on
the employment tribunal system. Jane Brown, solicitor at Manches, believes the
system has to adopt the costs rules that apply to ordinary courts, with the
loser paying the winner’s costs. "It would make employees think long and
hard before bringing a complaint to tribunal – the same as if they were issuing
a claim in court," she said.
Employers will have to be patient for the regulatory details – they will not
be available until it becomes an Act late in the year.
When they are released, Rita Donaghy, chairwoman of Acas and member of the
Employment Tribunal Taskforce, hopes the relevant agencies will have been sufficiently
primed and resourced to offer effective support and guidance to employers.
Donaghy warns that tribunal applications could shoot up in the short term as
the new procedures are bedded in, but she is confident Acas will be able to
guide them around the "elephant traps".
"The intentions of the employment tribunal reforms are brilliant, but
the devil will be in the detail," she said.
The aims of the employment tribunal reforms are to:
– Promote the internal resolution of
workplace disputes through the introduction of internal disciplinary and
grievance procedures and allow variation of tribunal awards to support the use
of the procedures
– Improve the understanding of the employment relationship by
enforcing wider compliance with the written statement of employment particulars
– Make changes to the way unfair dismissals are judged, by
making employers follow basic procedures but no longer penalising them for
irrelevant mistakes beyond that
– Provide for timely and amicable settlement by introducing
fixed conciliation and widening the scope of compromise agreements
Compensation culture growing in
Compensation culture is growing among
manufacturing employees, according to research released last week by the
Engineering Employers’ Federation.
The research shows that a quarter of all claims handled by the
EEF were withdrawn by the tribunal applicants before reaching a hearing. This
compares to 17 per cent in 2000.
Peter Schofield, head of legal affairs at the EEF, said:
"It means that the applications were withdrawn for nothing and supports
the view that employees had resorted too readily to tribunal without sorting it
out internally first. It shows they are part of the growing compensation
The proportion of all claims upheld at tribunal hearings fell
by over a third to 4 per cent. Seventy-eight per cent of all claims were
settled or withdrawn before reaching a hearing in 2001, according to the
Schofield said the pattern of tribunal awards remains the same
as the previous year. In 46 per cent of unfair dismissal cases – where awards
were made – only £3,000 or less was awarded. In two-thirds of unfair dismissal
claims where awards were made, less than £5,500 was awarded.