Statistics show that there has recently been an increase in the number of employment tribunal claims. Michael Delaney examines the reasons behind this and advises employers involved in making redundancies on how to avoid being taken to tribunal.

Recent data from the Tribunals Service has shown an increase of 43% in the number of employment tribunal claims filed for the period 2007-2008. The figures show that the number of employment claims have increased from 238,546 in 2006-07 to 296,963 in 2007-08.

A number of reasons have been given for this increase, including the introduction of legislation favouring employees, the increasing popularity of ‘no win no fee’ claims processed by solicitors, and the current economic climate of rising unemployment.

A number of legislative changes in recent years have given employees more rights and provided them with the impetus to make claims, as their employers fail to grasp changes to employment law.

The Working Time Regulations 1998 provide the right to limit the working week to an average 48 hours and a right to 11 hours rest per day. Whilst employees are still able to opt-out of the regulations, they have been cited as a reason for the increase in employment tribunal claims. Working Time Directive cases rose from 21,127 in 2006-07 to 55,712 in 2007/08, an increase of 164%. Many of these cases relate to holiday entitlements not received.

Dismissals and grievances

The Employment Act 2002 provided that employers must follow a three-step procedure when dealing with disciplinary or grievance matters. Failure to do so can result in an automatic finding of unfair dismissal of the employee and thus many employers have faced claims for simply not following a step in the dismissal process or grievance procedure.

The Department of Trade and Industry (DTI) launched a consultation in March 2007 with a view to abolishing the statutory dismissal and grievance procedures introduced in 2004 under the Employment Act 2002. The consultation followed publication of an independent report on employment dispute resolution by Michael Gibbons, which was commissioned by the DTI, after it became clear that the new procedures had not reduced the number of employment tribunal claims. The Employment Act 2008 repealed the statutory dismissal and grievance procedures, as of 6 April 2009, and it will be interesting to see whether the number of employment claims will decrease as a result of the proposed changes.

Whilst the above legislation goes some way in explaining the increase in employment claims, the dramatic rise in equal pay claims and sex discrimination claims appears to account for the majority of claims now being made to the tribunal.

Some 62,000 equal pay cases were filed between April 2007 and March 2008, an increase of 42%. Claims made against the NHS and other authorities have faced the brunt of this increase. The claims have generally centred around female NHS staff, who care for patients, challenging being paid less than the male workers, who look after the hospital buildings. In fact, the number of claims against the NHS has increased so significantly in recent years that, in 2007, two separate and dedicated teams were set up at the Tribunals Service to deal with them.

An increase in employee awareness of their legal rights, as shown above, coupled with the new trend for aggressive litigation is a significant cause of the overall increase in claims. Solicitors acting on a ‘no win no fee’ basis are attracting clients to make claims, whereas before employees would have been reluctant to do so because of the legal costs involved. The allure of a ‘no win no fee’ arrangement has meant that employees are becoming less reluctant to settle claims as they are attracted by the potential compensation they could be awarded at the tribunal with little risk if they lose.

The introduction of further enhanced maternity rights, as well as age discrimination legislation, may result in an increase in the number of claims in the future. Furthermore, the number of age discrimination claims are now standing at record levels. Over 3,400 were filed last year. Employers must therefore make sure they implement and not breach new legislation.

How to avoid potential claims

The current economic climate has meant that many employers are now facing redundancy situations in the workplace. These situations could potentially lead to a surge of unfair dismissal claims as employees challenge the fact that their roles were not redundant or that the redundancy procedure followed by the employer was unfair.

The impact of this on the number of employment claims being made has not yet been reported by the Tribunals Service, but it seems apparent that it may well be a cause for an increase in claims relating to unfair dismissal or discrimination being made in the future.

To avoid potential claims arising from redundancy situations, employers should ensure they have proper dismissal (including redundancy) procedures in place. This includes writing to the employee at risk of redundancy, providing selection criteria that will be used in a redundancy situation.

A series of consultation meetings should then follow, giving the employee the opportunities to challenge or respond to the situation. Suitable alternative employment should be discussed before the final decision to make the employee redundant, as well as giving them the right to appeal the decision.

The effort it takes to implement the correct procedure will far outweigh the potential cost of not doing so and employers should therefore try to keep up to date with current legislation so as to avoid potential claims. Employers should also be aware that there are collective redundancy obligations where more than 20 employees are proposed to be made redundant from the same ‘establishment’ within a 90-day period.

If employment claims are still pursued it is advisable, where there has been a breach of procedure by an employer, to try to negotiate and settle claims. This ensures that employers will not face the cost of preparing for a trial at the tribunal and the accompanying potential media publicity. Employers are advised to view the full data at www.employmenttribunals.gov.uk/publications.

Michael Delaney is an employment partner at Matthew Arnold & Baldwin LLP