Business is losing confidence in the employment tribunal system despite much-needed reforms to tackle Britain's burgeoning compensation culture, the CBI says today (Friday).
A new report from the employers' organisation reveals companies are very concerned about the complexity of the new procedures even though the number of tribunal cases has fallen since the reforms were introduced last October.
The system is supposed to provide cheap and effective resolution of workplace disputes. But too many firms are still settling cases they have a strong chance of winning because they fear the costs of going to tribunals which, they believe, too often allow weak and vexatious claims to be heard.
John Cridland, Deputy Director-General of the CBI, said:
"The new tribunals procedures are falling short. They may be having an impact on absolute numbers but are unnecessarily complicated and run the risk of undermining business confidence. The number one priority for any review must be making the regulations more user-friendly.
"Tribunals, across the country, also need to adopt a more consistent, common sense approach. They must properly judge claims on their merit, allowing deserving ones to be heard while striking out unscrupulous ones".
The worrying picture emerges in the CBI report 'Restoring Faith In Employment Tribunals' which marks the first anniversary of reforms aimed at resolving grievances in the workplace rather than at tribunal. It found that:
- 100 per cent of firms with fewer than 50 staff settled every claim despite advice they would win almost half the cases, and 26 per cent of all firms settled even if they felt the claims lacked merit.
- 45 per cent of employers believe the system is ineffective and 50 per cent reported a rise in weak and vexatious claims in the last 12 months despite the reforms.
- 76 per cent have encountered extra red tape because of the new reforms and 26 per cent said the overall system is too costly - each claim costs a business £4,360 alone in legal fees, on average, on top of management time and stress.
- 55 per cent say the tribunal system has become too adversarial. A further 19 per cent believe it damages rather than helps employee relations.
The CBI believes changes to both the operation of the employment tribunal system and the statutory dispute resolution procedures are necessary to restore employer confidence in the system - and has a series of recommendations.
Claimants should be required to make it clear in writing they are lodging a grievance so employers know they have to begin the appropriate procedures. The CBI also recommends that the Government reviews the procedures in relation to redundancies – since October this has been causing employers significant headaches.
Tribunals must make full use of their powers to dismiss weak and vexatious claims and for the process of dispute resolution to be speeded up – as the reforms were intended to achieve. And tribunal chairmen must take a common-sense approach to the new procedures and concentrate on the substance and merit of cases - not overly focus on the technicalities of process.
Costs in weak and vexatious cases should be awarded against losing complainants to deter unscrupulous litigants. This happened in fewer than one per cent of all cases last year and only half of all complainants were aware it could happen - notably 41 per cent withdrew their claim when it was pointed out.
There also needs to be greater regional consistency with businesses reporting different practices in different parts of the country. A charge for going to a tribunal, set at an appropriate level to ensure people have access to justice, should be introduced to deter weak or vexatious claims, the CBI says.
Tim Watts, Chairman of the Pertemps Group, said:
"Employment tribunals are not always even-handed and often favour the employee. We had one case recently where the employee failed to attend on three consecutive occasions, gave no reason for his failure to appear and yet was granted a fourth hearing, when the case was dismissed. We received no costs.
"Too many employers believe they are vulnerable to vexatious and frivolous claims because costs are seldom, if ever, awarded. In the very rare occasion that costs are awarded to us, it is often impossible to enforce."
1. The report is based on answers by 450 respondents to the CBI/Pertemps Employment Trends Survey 2005, discussions with leading law firms and consultation with CBI companies.
2. The number of tribunals in 2005/05 was 25 per cent lower than the previous year, falling from 115,000 to 86,181. When multiple cases (joint claims against an employer by several individuals) were discounted the fall was 16 per cent. This decline is believed to be largely, if not wholly, accounted for by a time-lag between claims and tribunals. This was because of a new requirement for claimants to channel their grievances through internal company procedures before being considered for a tribunal.
3. The Employment Tribunal System was established in 1964 to protect both employers and employees. The reforms were contained in the Employment Act 2002 and came into effect in October 2004.
4. The figure for the average cost of responding to a grievance is provided the Department of Trade and Industry's Survey of Employment Tribunal Applications in 2003 and is the most recent available.