Coalition Government measures to reduce the rising number of tribunal cases will lead to more employers having to pay lump sums to settle claims out-of-court, the Employment Minister has admitted.
A key element of the Government’s proposed changes to the employment tribunal system is to encourage workplace mediation when a dispute arises between employers and their staff in order to try and prevent cases reaching court. Under its plans, all such cases would be automatically referred to the mediation service, Acas, in a bid to cut costs.
But Employment Minister Ed Davey admitted to the Daily Telegraph, that the move would inevitably lead to more cases being resolved out-of-court by means of so-called ‘compromise agreements’. In this instance, employers pay the claimant a lump sum in return for guarantees that they will make no further claims against the company.
“We do think settlement agreements will go up. We don’t have the data, but yes, I would expect they would go up,” Davey said.
Adrian Crawford, a partner at law firm Kingsley Napley, also warned that conciliation was likely to tempt more companies into settling early in a bid to avoid new costs to be imposed by the Government if they lost the case. “Employees know the price of an employer going to court and losing and they will exploit that,” he said.
Under the proposed new rules, employers that lose their case would be fined up to £5,000 for the first time. They could also end up having to reimburse newly-introduced claimant fees for lodging a case as well as paying legal fees, effectively being hit with a triple whammy.
Official figures indicate that the average out-of-court settlement, meanwhile, is £5,400.
But the Civil Mediation Council’s Workplace Committee, which is chaired by Clive Lewis, welcomed the proposals. They include setting up a retail-specific pathfinder project to bring together large retailers that have invested in mediation services in order to share best practice as well as the creation of two regional pilot schemes.
These initiatives will involve training volunteers in workplace mediation skills from small businesses that are located in two different areas of the country. The volunteers will then be expected to form local mediation networks to ensure that member organisations have access to independent expertise should they require it.
Fine line
Mike Emmott, an adviser to the Chartered Institute of Personnel and Development, which sits on the Committee, said: “We welcome the Minister’s support for helping organisations to migrate from a risk-averse, compliance-based culture to one that focuses on informal methods of resolving conflict. The Department for Business’ proposals for pilot schemes to train individuals in mediation skills will help drive this agenda forward.”
The Government introduced a consultation entitled ‘Resolving Workplace Disputes’ last week which, among other things, proposed introducing employment tribunal fees from either 2012 or 2014, depending on the option chosen.
The first involves charging claimants fees of between £150 and £250 to issue a claim and between £250 and £1,250 to have it heard. Employers would also be required to pay fees of between £60 and £750 for making certain applications to the tribunal such as counter-claims.
If either party wished to appeal, the fees payable to the Employment Appeal Tribunal would amount to £400 for an issue fee and £1,250 for a hearing fee.
The second option would see fees, ranging from £200 to £1,750, being levied only when someone issued a claim.
The existing fee remission and waiver system that is used in the civil courts, would operate for those unable to afford to pay the sums involved and tribunals would have the power to order the losing party to reimburse the victor.
Geoffrey Mead, partner at law firm Eversheds, said: “Many employers welcome the introduction of fees for those bringing claims, but they remain cautious as to how they will work in practice.”
To get it right, the Government would have to tread a fine line between, on the one hand, concerns that fees are an unfair barrier to justice for genuine but poor claimants and, on the other, the risk that if a majority of claimants are eligible for fee remission or waiver, that the changes would serve little useful purpose, he added.
The aim is to prune back on the 44% year-on-year rise in the number of claims, bringing the total to 218,000 in fiscal year 2010/11, which is seeing a resultant increase in cost to the public purse.
