HAVING been in business for 13 years without a staff dispute, Terry Moore was
shocked when one of his employees made a claim for unfair dismissal.
Convinced he had acted correctly, Moore, who employs 15 people at his Kent
health club, decided to fight the claim at a tribunal.
“It felt like a bit of a betrayal as the employee had worked for us very
happily for years. We were convinced we had done nothing wrong.”
After an exhausting day of legal argument in courtroom-like surroundings, the
tribunal found in favour of Moore. Despite having been found not guilty of
unfair dismissal he had to pay £1,200 in legal fees and a fine for not
having had a contract of employment in place.
Although the financial cost was unwelcome, the real damage the tribunal caused
was the time it took, said Moore. “We probably spent a week working on the
preparations for the tribunal, plus a whole day for the hearing itself. It’s
a lot of time when you’re trying to run a business.”
Moore’s experience of an employment tribunal is actually a relatively benign
one, according to Mike Huss, employment-law specialist at Peninsula, one of
the Sunday Times’s business doctors.
At best it is a stressful process. Sitting across the room from a once-valued
employee being accused of unfair treatment can be hard to take, said Huss.
“It can be an intensely personal process. I often hear bosses or their wives
say how upset they are and how they treated the employee like a son or
daughter.”
Being cross-examined in the same way as you might in a criminal court only
adds to the tension. Huss said: “Their legal counsel might do his Perry
Mason bit, bullying and harassing you and trying to confuse you or catch you
out. It can be a pretty charged atmosphere. I was assaulted at a tribunal
once by an employee and people are often reduced to tears. Even if you win,
you’ll come away feeling like you’ve been through the wringer.”
The financial penalties alone can be painful. A typical award against you
could be anything between £5,000 and £10,000, not including legal
fees. If sexual or racial discrimination damages are also awarded, the fine
can be higher still.
The chances of being taken to a tribunal are increasing, along with the
amounts awarded to employees. In the year to March 2007 people made a record
number of claims, 132,577, up from 115,039 the year before. The average
award for unfair dismissal was £7,974, for sexual discrimination it was
£10,052, and the average costs awarded were £2,078.
While the cost and the number of claims are rising, the complexity of
employment rules is growing, according to Murray Fairclough, of Abbey Legal
Protection. “As the number of laws protecting employees increases, so do the
ways to get it wrong. That’s not a pretty picture for employers.”
Equal-pay tribunals soared from 17,268 to 44,013 last year, the largest
increase by far, while sexual-discrimination claims nearly doubled, from
14,250 to 28,153.
Given the flood of new claims and new laws, it does not surprise Huss that
small firms are twice as likely as larger firms to lose in a tribunal. “A
company’s problem is usually that it just does not know the law. And why
should it be expected to? We have a whole department just dedicated to
keeping up with all the legislation.”
Many firms choose to settle, even when they feel they are in the right, just
to avoid the angst of a tribunal, said Huss. “Even if you win, the chances
are you will suffer all the costs. You very rarely get them back.”
Part of the problem is staff can challenge employers without incurring any
expense or fear of penalties against them if they make frivolous claims,
said Fairclough.
“If you want to sue your neighbour you have to lodge £150 with the small
claims court, but employees don’t have to do any such thing. Claims can
theoretically be made against employees who act out of spite, but in
practice they hardly ever are. The financial burden falls almost without
exception on the employer.”
The other iniquity of the tribunal system, according to Huss, is that the same
procedure handles all kinds of cases, from wrongful dismissal to sexual and
racial discrimination. It is a monolithic system that places the burden on
employers to prove their innocence, he said.
“It’s a one-size-fits-all approach in which subtlety and nuance get lost.
THE DEVIL’S IN THE DETAIL
IF you think you may need to dismiss someone or make him or her redundant,
take advice and make sure you find out exactly what procedures you need to
follow. A lot of businesses forget that you are likely to lose at a tribunal
on a procedural practicality – about 80% of hearings are lost this way.
If you failed to have the right number of meetings or letters sent or had the
wrong person chairing a disciplinary meeting, you will lose.
Hiring legal advisers on a retainer is the best way to ensure your contracts
are watertight. And you can take out insurance against tribunal losses.
Ensure you have legal and employment advice on hand when a problem does arise.
Typical annual costs start at about £1,500 for a firm employing about five
people.
If the worst happens it may pay to settle with the employee rather than be
dragged through the tribunals process.
Useful contacts: www.employmenttribunals.gov.uk
www.acas.org.uk www.peninsula-uk.com
www.abbeylegal.co.uk
