Unfair dismissal: Keeping businesses up to speed

Employment legislation is certainly an area of debate at the moment among business owners, with yet more changes coming into affect at the latter part of last month, following previous amendments that the UK Government made earlier this year.

The new changes specifically relate to unfair dismissal claims and the procedures that staff members should take when considering making such a claim.

The median compensation claim for unfair dismissal costs each business £4,560. Now this might not sound like a large amount for multimillion-pound profit-making companies, but for the most SMEs, this could represent a significant outlay.

Her Majesty’s Courts and Tribunal Service – the agency that is responsible for the administration of the courts of England and Wales – also highlighted a 44 per cent rise in unfair dismissal claims before the new rules took effect, with some 15,300 claims made in the quarter to September 2012. This was compared to 10,600 in the three months leading up to June.

Therefore, with unfair dismissal claims seemingly on the up, and rule-changes occurring so frequently, this piece summarises the latest amendments and advise you on exactly what you need to be aware of to reduce the likelihood of a claim being made against your business.

Tribunal Fees
Employers should be aware that employees who now wish to issue a claim against their company will now be required to pay a fee. The amount of each fee will depend on the type of claim. More straightforward claims are allocated to the ‘Level 1’ category, referring to claims that require very little or no case management work, such as claims for unlawful deductions from wages and redundancy payments. All other claims fall in the ‘Level 2’ category and involve more complex issues, such as claims for unfair dismissal, discrimination, equal pay and whistleblowing.

Tribunal Procedure
The previous system of case management discussions and pre-hearing reviews will now be combined into one ‘preliminary hearing.’ A more rigorous paper sifting stage will take place to ensure that weaker cases do not proceed through the system, and tribunals will now encourage parties to go through the process of mediation.

The interest on unpaid tribunal awards will run from the day following the date the judgement is sent to the parties, and no interest will be payable if the amount is paid within 14 days. Interest on discrimination awards will increase to 8%, up from 0.5%.

Payouts for successful claims will be capped at one year’s salary or £74,200 (whichever is lower) and does not include pension contributions, benefits in kind or discretionary bonuses.

Pre-termination Negotiations
Employers are able to engage in ‘pre-termination negotiations’ with an employee, even where no formal dispute has yet arisen. Under the new law, employers can enter into termination discussions at any time with their staff without fear of the discussions being used against them.

Compromise Agreements
Compromise Agreements have now been renamed ‘settlement agreements’ and are designed to make it easier for employers to agree departing terms with employees. Despite the change of name, it remains a legally binding document, and once signed, an employee cannot bring a claim against their employer. The offers and discussions of a proposed settlement instigated by an employer also cannot be used to influence unfair dismissal claims at an employment tribunal.

Now is a particularly important time for employers ensure they are up to speed with the ongoing changes to UK employment law, especially as more amendments are now taking place in areas such as employee-shareholders and the Equality Act. Nobody wants to get caught out by these changes, so watch this space!


About Hugh Hitchcock

Hugh Hitchcock is a director at DJM Solicitors, a commercial law firm providing legal services to clients across the UK and Los Angeles, Hong Kong and Japan. His career spans 23 years spent in media and corporate law, and he specialises in dispute resolution. He previously spent six years at a leading media firm that acted for Elton John and The Beatles' record label Apple.