Companies fuelling compensation culture through not contesting claims

íHave a Goí Employees Cashing in as Employers Fear Tribunal Rise



Fear of a ícompensation cultureí and a prediction of a rise in tribunals by experts is causing too many employers to take a knee-jerk reaction of paying out before a claim reaches court. But UK business consultants and employment tribunal specialists Croner is warning that this behaviour could be fuelling the compensation culture in the first place.

Settling a claim early is giving the message to íhave a goí employees that if they file a claim, they will receive an out of court settlement from employers afraid of massive legal costs and threat to their reputation.

Of the 115,042 applications registered with the employment tribunal service in the year 2003/04, the Advisory Conciliation and Arbitration Service
(ACAS) settled nearly half (48,108) of these cases.*

Robert Kerr, Head of Litigation at Croner, says that employers are too afraid of their staff and should not automatically settle out of court, as long as they always act reasonably and take time to understand their legal obligations.

He says: The increasing jurisdiction and complexity of employment tribunals mean that many employers need to seek professional representation. However, the legal costs in such circumstances can be significant and at times disproportionate to the level of award made by the tribunal.

Partly for this reason, many employers are settling claims rather than contesting the case at an employment tribunal hearing.

The ícompensation cultureí, has been further perpetuated by the media who, by reporting on certain high profile cases, have given the impression that employees often receive extremely significant settlement payments or tribunal awards.

This is a misleading impression and, while there are certain high profile cases that have resulted in extremely high payments, this is not the norm.

The highest award made at an employment tribunal during 2003/04 was 635,150, but the average award for unfair dismissal, which constitutes almost half of all claims, was just 7,275. Even discrimination claims awards are not as high as some may think. For the jurisdictions of race, sex and disability the average awards were all under 30,000.*

Kerr advises: Statistics show that the threat is not as great as some may perceive. Rather than worrying about claims, employers need to tackle the route of the problem, which is understanding their obligations to and reasonable treatment of employees. Subject to doing this, they should not feel wary about taking appropriate steps to manage staff, and should not fear the threat of massive compensation costs.

Employers who take appropriate advice and follow the relevant steps to ensure legal compliance are in the best position to deal with claims and to defend themselves at tribunal. If employers believe they have acted reasonably, then they may be best advised not to settle.

*(Source: Employment Tribunals Service 2003-2004 Annual Report and Accounts.)