A sign of the times – Redundancy related claims on the increase
The Employment Tribunal Service recently released statistics which showed a 40% increase in claims in 2007/2008 from the previous year. Only three days later provisional statistics for the period April 2008 to February 2009 were published. These indicate that the figures for 2007 and 2008 may have been a blip and that the full year’s statistics for 2008/2009 will show a 24% decrease on the previous year with significant reductions in the number of claims for sex discrimination and equal pay. This perhaps is a better reflection of the general downward trend for many of the most common types of claims since 2005/2006. The anomalies in 2007/2008 were largely down to substantial claims by pilot and private sector workers under the Working and Equal Pay legislation, with many claims being heard together as group action. This was also coupled with an 175% rise in claims relating to trade union memberships.
Predictably, where there have been increases in claims during 2008/2009, it is in connection with claims relating to redundancy dismissals. Unfair dismissal is up by 26% on the previous year, breach of contract by 25%, claims relating to redundancy payments up 38% and there has been a staggering 80% rise in claims for a failure to inform or consult any collective redundancy situations. This perhaps reflects the fact that many employers are dealing with a collective process for the first time in their history, something which is tricky from a legal perspective but also new from a cultural perspective. The other large increase is in claims for age discrimination which have risen by 27%, possibly reflecting the fact that this legislation is now bedded in but also perhaps a sign that employees are using the age discrimination legislation to challenge their selection for redundancy.
When the 2007/2008 statistics were published there was a flurry of outraged comments in the press. Some laid the blame squarely on frivolous claims which they saw as drowning the system causing injustice for genuine complainants. There were calls for the introduction of a preliminary assessment for all claims submitted to the Tribunal Service to weed out those which are frivolous or which have no reasonable prospect of success prior to the employer having to incur the costs in defending them. It was also suggested that a fee was introduced (as for court claims), in the hope that this would put off those lodging claims simply as a negotiating tactic.
In view of the more recent statistics, it seems somewhat alarmist to call for a radical overhaul of the way Tribunals operate and perhaps, in the current economic environment, somewhat unrealistic. In my experience very few claims are entirely frivolous. Whilst any claims are very costly and time consuming and can have a substantial impact on a business, particularly when that business is suffering in the recession, the fact that a claim does not ultimately succeed or is withdrawn does not make it frivolous. In these troubled times when employees feel particularly vulnerable they are looking to Government for protection. It is highly unlikely that the Government will be willing to make changes which undermine certain key principles underpinning the way the Tribunal system works. These include the recognition that a finding for an employee that they have been unfairly dismissed or discriminated against can and does have a real value for that individual, beyond monetary compensation. This in turn underpins the Tribunal’s costs regime (in which parties generally cover their own costs) and perhaps explains why it remains the case that Tribunals do not as a matter of course, hold employees to account for their ex-employer’s legal costs even if they refuse a very good offer of settlement and proceed to Tribunal. The Chancellor’s announcement in the budget that the value of a week’s pay for the purposes of calculating redundancy payments (and the basic award) would increase from the current limit (set in 1 February 2009) of £350 to £380 reflects this. Note that currently there are no proposals for an increase in the cap on unfair dismissal awards. Note too that Mr Darling did not reveal when the proposed change would come into effect.
Clearly the best way for your business to avoid being one of the Tribunal’s statistics is to limit the risk of claims arising in the first place. Of course you can never entirely remove the risk of an employee bringing a Tribunal claim unless you ask them to sign a compromise agreement and even then certain claims are likely to be excluded. To reduce the risk of being part of the statistics, businesses should:
1. Follow due process and if they do not want to do this, either be prepared to buy out claims early and ask employees to sign compromise agreements or perhaps change their plans if they can do this, for example staggering redundancies to avoid falling into a collective consultation regime.
2. Always be able to justify decisions by giving objective reasons and ensure that those reasons are properly thought through and not arbitrary. There should always be documentary evidence supporting a management decision about employees which can be disclosed to an employee threatening a claim at an early stage in a dispute in the hope that their lawyer assesses their case as being weak.
3. Keep a good paper trail relating to decisions about staff for example, always properly complete appraisals which are a key part of performance management processes and don’t shy away from delivering difficult messages in appraisals about performance for a quiet life. Inconsistencies always provoke employees in a redundancy selection process, and make the process look like a fix. Remember that if your defence to a claim does not stack up with the written evidence this can leave you exposed to an inference being drawn by a Tribunal that the treatment of an employee is tainted by discrimination.
4. Be as transparent as you can. If employees feel you are hiding things from them they are more likely to be suspicious of your motives.
5. Ensure fair and even handed treatment. The golden rule is to treat others as you would expect to be treated. Do not forget that you have a duty to maintain trust and confidence with employees which entails being reasonable, even handed and honest with them.
6. Create the right environment for resolving disputes. Do not let issues fester. Deal with them as early as you can and create a working environment in which people feel they can comfortably raise concerns which will be listened to and dealt within an appropriate manner.
7. Importantly, keep an open mind at all times and if you cannot, at the very least make it seem as if you are. If an employee believes they are being treated fairly and listened to they are more likely to accept that their employment may be terminated or that they should be subject to disciplinary action.
Joanna Chatterton is an employment and HR lawyer and a Partner at Fox Williams LLP. She can be contacted at firstname.lastname@example.org or on 020 7614 2617.