Small Businesses Need Protection in Dispute Resolution

The Forum of Private Business is calling on the Government to protect small businesses against employees who exploit employment laws to make ‘vexatious claims’ against them.

Based on its Employment Panel research, in addition to 2008-09 employment tribunal statistics and data from the Civil Mediation Council (CMC), the Forum estimates that there are approximately 1,900,000 workplace disputes in the UK every year.

As part of its new Get Britain Trading campaign, the Forum is calling for more flexibility for smaller employers in order to free them to create jobs and drive economic growth.

Responding to the Government’s ‘resolving workplace disputes’ consultation, the not-for-profit organisation is highlighting the results of its latest Employment Law member panel survey.

According to the Forum’s research,92% of members support giving judges greater powers to ‘strike out’ weak cases, 86% back doubling the deposit and costs limits for vexatious claims and 73% encouraging settlements via greater transparency in revealing compensation sought and details of rejected settlements.

In addition, 62% support increasing employee claims eligibility from one to two years, 51% removing expenses payments to witnesses and 41% increasing opportunities for judges to sit alone and introduce legal officers to make the tribunals process more efficient.

Further, almost a third of respondents (32%) actually welcome a proposal to introduce financial penalties for employers who wilfully do not comply with employment law, suggesting smaller employers are more fair-minded than many critics argue.

However, some members surveyed feel that this enforcement would be better managed outside the tribunal system, while others would prefer employment law to be made more manageable before introducing fines.

&lquo;There is often a misconception that businesses tend to ride roughshod over the rights of employees but this is far from true for the majority of small businesses that rely on recruiting and retaining key staff in order to grow.”

said the Forum’s Chief Executive Phil Orford.

&lquo;Clearly, we need companies that do engage in this sort of behaviour to be dealt with, but there needs to be a better balance so that employment law protects smaller employers as well as workers.”

He added:

&lquo;We are currently in a situation where employment legislation designed to benefit employees can be a real barrier to creating employment, and favours individual workers at the expense of the rest of the workforce, often even when those claims are vexatious.”

&lquo;This has to change. We need a fairer system focusing on mediation and conciliation rather than paving the way for disputes to reach the tribunal stage, allowing firms to flourish, create employment and drive economic growth.”

Overall, the Forum is calling for:

  • Greater powers for judges to strike out weak cases and vexatious claims against business owners.

  • The deposit required from employees bringing actions to be increased to £1000 to discourage vexatious claims, and judges to be able to request a deposit before pre-hearing reviews.

  • The addition of a category of ‘lacking substantial merit’ where businesses can look at recovering costs from the claimant.

  • The extension of the qualification period for unfair dismissal to two years – which will not affect ‘day one’ rights of discrimination – in order to weed out some serial vexatious claimants.

  • The greater use of a clause within unfair dismissal law that allows judges to take account of the size and administrative capabilities of an employer in the way a dismissal has been handled.

  • More recognition of informal ‘good practice’ relationships between business owners and their staff rather than the presumption of managerial deficiency within SMEs.

  • Greater awareness of and access to mediation services – the preferred method of dispute resolution.

  • Greater balance between management and staff – work plans agreed in mediation, for example, should be legally enforceable on employees as well as employers.

  • More use of pre-claim conciliation where mediation fails, providing sufficient resources are available within the Government and ACAS if this is made mandatory.

  • ACAS to be able to request a two-week extension to its timescale for resolving disputes (a month has been proposed), if there is a realistic chance of a successful outcome.

  • Clearer information for claimants so they are aware of any potential rewards – and costs – they might incur.

  • Changes to the ET1 form that would allow employers – especially where they will represent themselves – to more fully understand the claims being made against them.

If the Government is to allow tribunals to impose additional fines on businesses, the Forum believes a number of safeguards should be put in place:

  • Fines should be proportional to the business as well as the award, recognising the disproportional impact of steep fines on small businesses.

  • The window during which firms can pay 50% of the cost of the fine should be extended to two calendar months – or introduce a sliding scale shortening the time in which the 50% relief applies as the turnover of a business increases – in order to help them control their cash flow.

  • Monthly repayments of fines at the 50% relief rate should be introduced where it has been agreed and commenced within the prompt payment period.

  • No additional fine should be levied where businesses have failed on technicalities, as opposed to a wilful refusal to comply.

Mediation v tribunals

The Forum is arguing that the greater use of mediation would benefit employers and the public purse. According to the Chartered Institute of Personnel and Development, dispute resolution costs the economy £24 billion per year – or approximately £12,000 per case.

While 76% of Employment Panel respondents prefer mediation to tribunals, one fifth (20%) have no preference. One of the major reasons given was that when a workplace dispute has escalated to the tribunal stage the relationship is already broken beyond repair and employers fear they will inevitably lose out.

Another was the effect the disproportionate amount of time managing individual employees – and mediation or tribunal claims – has on the rest of the workforce.

Many small business owners surveyed are concerned that, coupled with the inflexibility of the tribunal system, increasingly complex employment law could make it more difficult to resolve disputes early.

Another significant issue is the belief that tribunals are biased against employers because the burden of proof is on them to prove compliance with employment law. In the light of the Chancellor’s promise of greater scrutiny of the use of ‘no win, no fee’ lawyers, some business owners pointed out that using these lawyers encourages employees to take what they believe is ‘revenge’ on their former employer.

According to respondents, the benefits of mediation as opposed to tribunals include that a third party can help deal effectively with internal communication problems, and generally that it achieves conflict resolution rather than producing a winner and loser, which has been a criticism of the tribunal system.

Internal dispute resolution

However, 67% of small business owners resolve the ‘overwhelming majority’ of workplace disputes internally. Just 5% said they resolve less than half within the workplace while 3% resolve none internally.

Creating a fairer tribunal system is a key element of the Forum’s Get Britain Trading campaign, which is leading the call for simplified, proportional employment law and better, more business-focused training and skills provision.

For further business advice on dispute resolution see our article on Disciplinary, Dismissal and Grievance Procedures.

Small Businesses Need Protection in Dispute Resolution

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