Equality Act
Squaring Up
This year’s Equality Act and changes to grievance procedures a couple of years ago have changed the rules of the Tribunal game Have you got the stomach for the fight?
It is nine months since the Equality Act came into force to update, simplify and strengthen the previous legislation, and a couple of years since the introduction of new grievance procedures.
How have these two measures bedded in, and how can entrepreneurs best balance running an effective business with staying out of the Employment Tribunal?
According to the Ministry of Justice (MoJ), 382,400 Tribunal claims were made between April 2010 and March 2011.
Of those, 122,800 were dispose of (not accepted), which is a nine per cent increase compared to the previous year.
The number of receipts (accepted claims) was 218,100, an eight per cent drop ion the previous year’s figure of 236,000.
One of the most common types of claim is for unfair dismissal.
Defending a claim involves time and money – businesses spent an average of £4,000 trying to prove their innocence last year.
In 2010-11, 47,900 claims for unfair dismissal were made – just over ten thousand fewer than the 57,400 claims that were made in 2009-10.
Business owners are protected from claims of unfair dismissal if they can prove an employee’s contract was terminated in a fair and reasonable manner.
Employers have to show that they have acted in a reasonable manner when firing members of their team, so they can terminate contracts if a worker’s behavior or conduct is unacceptable for reasons such as theft, drug abuse, dishonesty or unjustified absences, among others. But, sadly, you can’t just sack someone because you don’t like them.
Unfair dismissal can be the result of any number of circumstances and compensation awarded for a claim that is not related to discrimination is capped at £68,400, although in rare circumstances awards may be above the maximum.
The average amount awarded by a Tribunal in cases of unfair dismissal is usually between £4,000 and £8,000.
However, if the unfair dismissal claim is linked to discrimination there is no statutory cap, which effectively means an employer could be liable to pay hundreds of thousands of pounds in compensation if they were to lose at a Tribunal.
The types of discrimination currently recognized by UK law are: gender; sexual orientation; ethnic background; colour; race; religion or belief; age; nationality; pregnancy and maternity leave; marriage or civil partnership; gender reassignment; and disability.
Awards for sex discrimination cases are usually in the region of £19,000, but it all depends on the job. This amount could reach six figures depending on the claimant’s salary, so losing a tribunal could have a serious impact ton a firm’s bottom line.
So how can an employer protect themselves from ending up in a Tribunal?
One of the first things business owners need to be aware of is the fact that a potential employee could actually bring a claim of discrimination during the recruitment process, despite not even yet being on the payroll.
A new provision in the Equality Act means that if a manager asks questions about medical history and then uses the information to exclude the candidate, that candidate has a right to file a claim.
Sian Davies, partner at Capital Law, says if an organisation asks unwarranted health-related questions it “will have the burden of proving they haven’t been discriminatory”.
She says the best thing to do is not to ask any questions about medical history, unless they are directly relevant to the role you are recruiting for.
If you are hiring a builder then it would be fine to ask about their health, but for a desk-based position it may not be relevant to ask any questions about physical health.
Meanwhile, Helen Hall, employment partner at DLA Piper, says bosses should always communicate with workers and ensure everyone has access to an employee handbook, as this lets everyone know where they stand.
“Lack of transparency can fuel fears of hidden agendas and conspiracy”, she adds.
Employers should implement a suitable grievance procedure and comply with the Acas Code of Practice, as this provides practical guidance to bosses, their workers and representatives on how to handle disciplinary and grievance situations in the workplace.
The Acas Code advises employers to keep a written record of disciplinary or grievance cases, something with which Chris Thompson, a partner at law firm Gateley, agrees.
Complying with the Acas Code could also reduce the amount of compensation you would have to pay out if found liable: the amount awarded can be increased or decreased by up to 25 per cent if the Tribunal decides either side has been unreasonable in not following the code.
Thompson says, “From an employer’s point of view, if they have good documentary evidence that supports what the line manager is saying then you can’t argue with it and are in a better position to defend a claim.
“So for managers the key to keeping your risk of claims to a minimum is to have good policies and regular training, so people know what to look for.
“If there is a problem then deal with it quickly before it escalates and if you have good paper records and good notes then if you do find yourself in a Tribunal you are in a much better place to defend it.”
Matthew Howse, partner in the employment department at Morgan Lewis, agrees with Thompson and says Employment Tribunals “adore paper”.
He explains, “They really do expect everything to be recorded, so at every single interview, every single meeting, take proper notes. Write letters confirming what has been done – if you don’t have that they are very, very sceptical of what your witnesses are saying.
“They want to see a document that says what your witness said in the meeting did actually happen”.
He says it may be worthwhile taking out an insurance policy against discrimination, but he explains that if an employer does do this, then it is vital they read the small print. As with so many forms of insurance, often many clients think they are covered for something when, in fact, they are not.
Hall explains that businesses that take out such a policy should be “realistic about the likelihood of their firm staying within the terms of the agreement”, as some stipulate that certain law firms have to be involved.
Jim Lister, partner and head of employment law at Pannone says cheap insurance policies are available if you are willing to accept a big excess.
“It’s worth considering insurance, because if you are employing ten people and you are willing to accept an excess of £20,000 a claim, then the premium you will pay will probably be a couple of hundred quid a year.
“Most businesses can stand a loss of £20,000 but they can’t stand a loss of £200,000, so insurance is a sensible consideration”, he adds.
It is also worth bearing in mind that the Employment Tribunal differs from the courts in that employers who successfully defend a tribunal claim are still liable for their own costs.
The Government recently launched a consultation that floated a number of proposals it believes will help speed up the process of resolving workplace disputes.
Officials have suggested that the qualifying period for employees to be able to bring a claim for unfair dismissal should be increased from one to two years, as they believe it will reduce the number of disputes that go to Employment Tribunals.
However, questions have been asked as to whether, if introduced, it would make much difference, because most bosses know whether staff are suitable within just a few months of hiring them and so wouldn’t hang on to bad ones for more than year.
And Lister says such a move could actually increase the number of discrimination claims, because workers that have been dismissed after less than two years of service might instead try for discrimination – which is not subject to any qualifying period – because they have “nothing to lose”.
Howse agrees with Lister and believes that if the rules surrounding unfair dismissal were extended to two years, people would look at other ways to bring an employment claim: and discrimination is the obvious one.
So how can you prevent a claim if you do need to terminate an employee’s contract?
Employers should ensure they have performance management strategies in place for all staff, as this way anything that is discussed will be down on paper and any improvements that the worker needs to make will also be recorded.
According to Emma Bartlett, partner in the employment team at Speechly Bircham, performance management schemes will be especially important now because of the abolition of the default retirement age (DRA).
Until recently employers were able to make staff retire at 65 but the DRA is being phased out and, as of 1 October, bosses will not be able to use it to compulsorily retire workers.
According to the Tribunal Service’s annual statistics, 2010-11 saw a jump in the number of age discrimination claims that were lodged compared with the previous year. A total of 6,800 age discrimination claims were filed - a rise on the previous year’s figure of 5,200, and this is expected to continue over the coming years.
When we spoke to business owners they told us, off the record, that if they had underperforming staff that were approaching retirement age then they would not currently take action because they know they won’t be working for the company for much longer.
However, the removal of the DRA means employers will not be able to just leave underperforming older workers to go their own sweet way. But if they single them out with performance management sessions then this in itself runs the risk of discrimination, because all age groups need to be treated the same.
So bosses need to remember to include all workers when carrying out performance management sessions and not just older employees – a potentially significant red tape burden.
Hall also says more age discrimination cases are likely to occur simply because, “Everyone has an age and so everyone can allege age discrimination”.
“The reality is that in many sectors older employees still find progression a challenge and with more employees over 65, this may be exacerbated, at least until there is a wholesale shift in culture,” Hall adds.
Solicitor at Glaisyers, says company owners will need to amend their retirement policies to reflect the changes in the law and consider adapting contracts that refer to a fixed retirement age.
She also says it’s important to regularly review contracts of employment and other policies “to ensure they comply with the current law”.
Speculation is mounting that the Government is considering introducing a fee that an individual would have to pay if they wanted to take a claim to a Tribunal.
Bringing in a charge would reduce the number of so-called “waste of time claims”, but faces opposition from those, such as trade unions, who argue that justice must be free, especially for the poorest workers.
Davies says it would deter time wasters, but “You have to balance it out, as the vast majority of claims in the Tribunal system come from people who earn minimum wage and so it could be difficult for them to raise just £50 if they had to pay”.
Howse, on the other hand, thinks that individuals with a “proper claim, which tends to result in large payouts, will not be put off by having to pay a levy of a few hundred pounds.
“However, it would have a good impact in terms of weeding out the weak cases”, he concludes.
If a claim is made and an employer is called to an Employment Tribunal then there are a number of options.
If a Tribunal rules in the claimant’s favour then you could be looking at a heavy loss, particularly if the ruling is for a discrimination claim, but some employers simply don’t want to risk things getting that far and so they make a commercial decision to settle.
Settling has pros and cons. Settling a case will bring it to an end once and for all, so there will be no need to spend more money on legal fees or waste time and effort – and, of course, you eliminate the risk of losing the case.
Even when firms have a strong case and can prove that the claims made by an employee are untrue, you will need to remember that at the end of the day the final decision will be made by the panel (which comprises a judge and two non-legal members with employment experience).
Davies says, “You never know which way the tribunal will decide something because they are human beings on the panel and they may have different views on things.”
However, Bartlett says it is important to think about reputation if you do want to settle a claim, as doing so a lot can have negative consequences.
“Small businesses who keep settling claims are then inviting people to bring a claim against you if they are disgruntled because they then know that they will get a pay off”, she says.
“So at some point the employer has to take a stand. If they have got a good case there’s a matter of principle that ‘we are going to fight this’. It sends the right message, not just to the person who’s bringing the claim, but also to the rest of the workforce.”
