Dated: 20 April 2011

The Institute of Directors (IoD) has today argued in its response to the consultation ‘Resolving Workplace Disputes’ that the Government’s proposed reforms to the employment tribunal system are flawed. The IoD does not believe that the proposals will achieve any significant reduction in the number of weak complaints or costs to business in terms of management time and lawyers’ fees.

To give employers greater incentives to take on new staff the Government should revise its proposals and tackle the problem of spurious claimants much more aggressively. We urge ministers to do this by introducing stronger ‘strike out’ powers for tribunals, universal employee deposits and compulsory pre-claim conciliation.

The employment tribunal system is broken and needs radical reform:

• The current tribunal system has failed. 35 per cent of IoD members have had a tribunal claim against them, but of those just 9 per cent were won by the claimant. In 30 per cent of cases the employer won, while in 13 per cent the claim was withdrawn. In 40 per cent of cases the claim was settled without a tribunal ruling.

• These figures lend further support to concerns expressed repeatedly by employers that many complaints are without merit, but that very often employers will choose to settle rather than face the time, expense and stress involved in defending a claim at tribunal.

• We are pleased that the Government has recognised that there is a problem, but the system will continue to be clogged up with weak claims unless ministers take a more ambitious attitude to tribunal reform.

A three-point plan – what the Government should be doing:

• Pre-claim conciliation should be compulsory unless both sides decline it.  Refusing or failing to engage reasonably in the process should be penalised using the range of sanctions available to tribunals (i.e. striking out, cost orders, reduction of any award).

• More claims should be prevented from going ahead by (a) requiring ACAS or some other independent body to reject claims that appear to be unfounded or invalid; by (b) raising the threshold for an acceptable claim; and (c) by requiring rather than just allowing employment tribunals to strike out claims that fall below that threshold.

• Employee deposits need to be compulsory to deter spurious claims. Access to justice will not be jeopardised if deposits are only taken after an employee loses their case.

Commenting, Miles Templeman, Director-General of the IoD, said:

“Being timid will get us nowhere. Employment tribunals need radical reform. Unfortunately, the Government’s proposals, although well intentioned, will do little to tackle the problem of weak claims. What we need are stronger ‘strike out’ powers for tribunals, universal employee deposits and compulsory pre-claim conciliation. These changes would reduce the number of vexatious claims and the associated costs to business in terms of management time and lawyers’ fees.”

Commenting, Alexander Ehmann, Head of Regulation at the IoD said:

“At the same time that the Government is trying to reduce the number of claims with this exercise, it is creating new grounds for bringing claims through abolition of the Default Retirement Age. The net result may well be a continuing increase in the number of claims year on year, which makes it even more important that the Government revises its proposals so that we have a tribunal system that works for both sides.”