Caroline Maher: Tribunal reforms will put SMEs on a firmer footing

And here’s more happy reading – the number of people out of work in the UK soared by 164,000 in the quarter to August, marking the biggest rise in the unemployment figures in any quarter in 17 years.

The general downturn in the economy has been bad business for just about everyone except the Employment Tribunal Service. The service recently published its annual statistics for 2010/2011, which show that 218,000 claims were raised in the period – 44 per cent higher than 2008/2009.

The Coalition Government has announced changes to the tribunal system which it claims will save British business £6 million per year and, it argues, encourage recruitment by employers who see the unfair dismissal rules as a major barrier to taking on employees.

This move is a key part of a strategy to create the conditions for businesses to expand, particularly small and medium-sized enterprises (SMEs), by reducing regulation and maintaining a flexible and dynamic labour market.

The first reform is to increase the qualifying period for raising an unfair dismissal claim from one year’s service to two, with this coming into force in April 2012.

Rather than being an entirely new move this is in fact a reversal, as it was only in 1999 that the qualifying period was reduced from two years to one.

This proposal is proving contentious, with trade unions arguing it will strip employees of rights and that employers will be inclined to cull staff prior to the onset of the two-year qualifying period, leaving employees without the legal right to claim unfair dismissal despite the best part of two years’ service.

The move may lead to indirect sex discrimination, as evidence has suggested that women are less likely to accrue two years’ service than their male colleagues since they are more likely to have interrupted periods of employment.

There will continue to be no qualifying period for certain claims, including discrimination claims. There is a fear that potential claimants with less than two years’ service will look for alternatives to raising an unfair dismissal claim and may resort to raising claims which require no qualifying period when these claims lack real merit.

The second reform means that from April 2013 claimants must pay a fee to lodge an employment tribunal claim. It is proposed that there will be a fee of £150 to £250 simply to raise a claim, with a fee of at least £1,000 if the case goes to a hearing. The Ministry of Justice will consult on the level of fees by the end of the month.

The Chancellor said that introducing fees would end “the one-way bet against small business”.

And a cheap bet it can be for those who fancy a long shot at a payday, despite their cases lacking any merit whatsoever. The employer will be forced to launch a defence, draining money and man hours, while a claimant can self-represent and drive forward the process at zero cost.

There is no real test of a case’s merits until the hearing, by which time matters will have dragged on for months and cost a hefty sum. Many cases are settled by employers simply because it is often cheaper to settle than to defend, even where the claim is flimsy to say the least. The statistics reflect this, with the Treasury stating that more than 80 per cent of applications do not result in a full hearing.

While tribunals do have the ability to make expenses orders, they seldom do, and each party, regardless of merit and success, bears their own costs. This move may prove a disincentive to those who would wish to bring vexatious claims.

The low-paid or those without an income may have their fee waived or reduced, and it is safe to say that a large number of complaints will come from ex-employees who are out of work by the time their claim is lodged.

Like it or not, things will be changing at the employment tribunal – if only we could say the same about the economy.

• Caroline Maher is a solicitor with CCW Business Lawyers