By Ben Stepney, Employment Solicitor. Article first published in Talk Business August 2013.
In the right circumstances this could be a real opportunity for employers to have frank discussions with an employee about their exit from the company without the risk anything said later being used against them.
Most employers know misconduct or poor performance when they see it. Yet SME owners do not always have the access to expert HR or employment law advice to guide them on how to conduct a formal process, for example a disciplinary or poor performance process. The new rules enable employers to choose at which point they want to start discussions with the employee about leaving and so avoid a protracted formal process. I expect that many SME owners will welcome this additional flexibility in how to address these issues.
Given that conversations tainted with potential unlawful discrimination will not be covered, this will rule out going down this route in cases of retirement or long term sickness where a disability is involved. So settlement discussions will have their uses, but only a narrow context.
Unfair dismissal awards
Employers facing employment tribunal claims will usually want to know what the worst case scenario is. This can now be answered with much more certainty in unfair dismissal cases.
Currently very few claimants are awarded more than 12 months net pay, although many think that they are entitled to more. So this change is unlikely to reduce the size of the awards actually made to claimants by tribunals. It will mean though that claimants have to be more realistic about the amounts they could win and this could lead to more claims settling at an early stage. This is useful for SME owners for whom the legal cost and management time of fighting a claim all the way to a final hearing, whatever the merits, can be substantial and may outweigh the cost of settling early on.
The downside is that this is likely to lead to more claimants bringing discrimination claims in order to avoid the cap applying. This adds to the time and cost for an employer of dealing with a claim. To counter this, tribunals will need to be robust about sifting out such spurious discrimination claims.
The government’s aim here is to make users of the tribunal system foot more of the cost, rather than to reduce the number of claims, but I expect that introducing fees will do exactly that. Having to pay a fee will make a potential claimant properly consider whether their claim has any merit, putting off those with weak or vexatious claims, which can be timely and costly for an employer to deal with.
Employees who feel that they have been wronged by their employer may find other ways to fund the fees though, for example through after the event insurance products that are starting to become available and which are widely available for personal injury claims. Successful claimants are likely to be able to recover their fees from the employer, which would mean that the cost of the tribunal system is simply shifted on to employers.