Will employment tribunal changes make much difference?
- 5 October 2011
- From the section Business
Employment tribunals create more controversy than any other part of the judicial system.
So the government's proposed changes to the rules, intended to make life easier for businesses, have inevitably met with a hostile reaction from trade unions.
Many employers, especially small firms, argue that claims with no merit are often brought in the tribunal.
In practice, most cases are settled, as businesses want to avoid the hassle and expense - including the cost of management time - of fighting the case all the way.
Although tribunals may award costs against someone who has behaved vexatiously in bringing a claim - and the last government changed the law to make this simpler - in practice they are often reluctant to do so.
Union representatives and workers, however, view employment tribunals differently.
Legal aid has never been available for representation in the tribunal, and people who have been badly treated at work need to have a simple and affordable way to get redress.
When employment tribunals were created in the 1960s, they were supposed to be readily accessible and non-legalistic.
Legal representation was discouraged.
But as the legal rules have become vastly complicated, often with an EU law dimension, many "no win, no fee" representatives have come on to the scene, and the number of claims has multiplied.
The government plans to make two major changes.
First, from next April, an employee will need to work for two years, rather than one, to be protected by law from being sacked unfairly.
The thinking behind this move is that employers need to have more management flexibility.
Also, they will be keener to take on new staff if they have more time to weed out sub-standard workers without facing litigation.
The government reckons the change will mean 2,000 fewer claims, and in theory employers will save nearly £6m, each year.
Unfortunately, the hoped-for gains may prove largely illusory.
In a minority of cases, there will still be scope for people with less than two years' service to claim unfair dismissal, for instance if they are sacked after making a complaint about health and safety.
More importantly, a person who claims either to be a whistleblower or a victim of discrimination needs no qualifying service in order to go to the employment tribunal.
Perhaps, therefore, some employees deprived of the right to claim unfair dismissal will make discrimination, health and safety or whistle blowing claims instead.
Dealing with such claims, even where they are weak, is notoriously time-consuming.
So the chances are that this reform will not do a huge amount to cut "red tape" or burdens on business.
Looking at the wider picture, at present, the tribunal system costs the taxpayer £84m annually.
Since more than 230,000 claims were made last year, the change will not reduce that figure noticeably.
The government's second proposed change, expected to come into effect in April 2013, could have much more impact.
For the first time, workers will have to pay a fee if they want to make a claim to the employment tribunal.
This is a dramatic break with the past.
The new regime is yet to be finalised, and a consultation is being launched.
At present, the suggestion is that it will cost £250 simply to enter a claim, a further £1,000 once the claim has been listed for a hearing, and more if the value of the claim is over £30,000.
The plan is for these sums to be repaid if a claim succeeds, but forfeited if it is lost.
What happens where the case is settled will be key, as the vast majority of claims end up in a compromise deal of some kind.
A fee may not be required of a low-paid or unwaged claimant, and the rules here will require careful thought, as many tribunal claimants are either out of work or short of money.
This change may discourage a significant number of claimants, and could prove costly for trade unions funding claims made by their members.
But one risk for employers is that the cost of settling cases might rise, as employees seek to recoup fees paid.
The debate about the all-important detail is sure to be lively - and it could prove very important for employers and employees alike.
The opinions expressed are those of the author and are not held by the BBC unless specifically stated. The material is for general information only and does not constitute investment, tax, legal or other form of advice. You should not rely on this information to make (or refrain from making) any decisions. Links to external sites are for information only and do not constitute endorsement. Always obtain independent, professional advice for your own particular situation.