UK employers reassess litigation risks as tribunal claim window doubles

The time limit for bringing most Employment Tribunal claims doubled to six months on 1 October, for disputes arising from that date. The question now is whether employers will face more claims as a result. And with major unfair dismissal reforms coming in January, they could face not only more litigation but significantly higher compensation awards as well. We’ll speak to employment litigation expert Rebecca Sulley about the risks, the implications for settling disputes, and how employers should respond.
The changes come as pressure on workplace dispute resolution is already growing. The Financial Times reports a 26% increase in demand for Acas’s individual dispute resolution service, driven particularly by disability-related disputes. Against that backdrop, Acas chair Baroness Maggie Jones has warned that workplace disagreements can escalate unnecessarily when they become formalised too quickly, making compromise harder as positions become entrenched. Her message to employers is to encourage early, informal conversations where appropriate, before disagreements develop into formal disputes.
Meanwhile, People Management highlights another important shift coming in January. Employers accustomed to treating the first two years of employment as a relatively low-risk period will need to rethink that approach when the qualifying period for ordinary unfair dismissal falls to six months, putting much greater emphasis on identifying and addressing performance problems early.
And with the statutory cap on unfair dismissal compensation also being removed, the financial stakes could be considerably higher. That may change not only how employers approach dismissals, but also how they assess the risks of defending a claim rather than settling it.
So, will the longer claim window lead to more Employment Tribunal claims? I put that question to Rebecca.
Rebecca Sulley: “We anticipate that the number of tribunal claims is likely to increase given this longer time limit. Three months isn't a huge amount of time from a particular, for example, act of discrimination because it can take grievances three months to resolve and then once the appeal starts we find that some people do put in a claim, but actually it's likely to be out of time. So six months really gives employees a longer period of time to reflect on what's happened, for internal processes to finalise, which they might not be happy with, so we do think it's likely to lead to a rising claims. We do still now have claims which are submitted out of time, but only just out of the three-month time limit, so again it just gives employees longer to make arrangements for bringing a claim, and that might be that they go and take legal advice, which can take some time to find at present, and if they have six months, they'll have longer to do that in. The government have suggested that they don't think it will increase numbers because they believe it will give more time internally for the matter to be resolved, and potentially it might give you more time to discuss conciliation, and you have a longer period in which to do that across the six months, but we still think that it is likely to result in an increase because people will have longer to formulate claims and, in addition, we might find that they are even longer claims than they currently are because they have that additional time to put in everything that they believe happened to them.”
Joe Glavina: “How could the longer claim window change the way that employers approach grievances and settlement discussions? What impact do you think it's likely to have?”
Rebecca Sulley: “We do quite often see claims being put in before a grievance has been finalised because of the time limits. So potentially the longer time limits will enable employers to finalise grievances, to finalise appeals, to look at alternative solutions such as mediation before the individual needs to contact ACAS and bring a claim, so that really means that it's important for employers to spend time carefully gathering the evidence for the grievance and doing a detailed outcome letter, and again also doing a detailed appeal if that's there, and looking at the alternative ways of resolving matters before it becomes a claim. It does, however, mean there is that longer period of uncertainty for employers and one of the areas that we have seen a huge increase in recently is the number of DSARs that have been lodged by potential claimants, often in conjunction with a grievance, and that in itself can lead to more work for employers during that period of time. I suppose the flip side in terms of it being helpful for employers is that there'll be a longer period of time to consider settlement and to get instructions from the business because we appreciate that can be something that delays matters, getting approval if we are trying to reach a settlement. So having that longer period of time means you might be able to have those internal discussions directly with the employee at the outset, and then through ACAS if they do make contact. But it's just something to bear in mind in terms of potential settlement and getting budget holder approval.”
Joe Glavina: “In January the qualifying period for ordinary unfair dismissal is due to fall from two years to six months, and the statutory compensation award cap for unfair dismissal is also going to be removed. So you've got these three things going on. What impact do you think all of that is going to have in practice?”
Rebecca Sulley; “A lot of employers are quite nervous at the moment because all of these changes coming in are no doubt going to result in additional claims, and we're already facing a huge increase in claims from this time last year. So it's something that we're saying boards need to really be aware of, that there will be an increase in claims because there is an increase in the number of people who can now bring them. So, from January when the unfair dismissal qualification period reduces, you will have a lot more people who are potentially able to bring a claim who haven't been with the business very long, and that's where we're saying to employers that you really need to look at your recruitment process, and also your probation periods and your performance management during those first six months. That will be really key, and that's where you should be focusing management training at this time to try and avoid the risk of people who are unsuitable for the business reaching their six months qualification. In addition, we have the six month period in which you can bring a claim, which we've already said is likely to result in an increased number of claims, and then, with the removal of the unfair dismissal statutory cap, whereas before people who were bringing straightforward and fair dismissal claims, it was easy for employers to assess what is the worst case kind of liability they might be exposed to if a finding went against them. Now that can be completely unlimited, and it does make things like settlement much harder because employees have more unrealistic expectations and if there is a difficult job market, it might mean that they won't find another job within 12 months and potential liability can be much higher for employers. So there is a lot to think about, and like I said, it's important to make your HR team and your managers aware of the increased risk that is involved in these government reforms.”
So the key message for employers is to reassess their litigation risk now. With more employees potentially able to bring claims, longer time limits and greater financial exposure, HR teams should be reviewing their approach to recruitment, probation, and dispute resolution. Rebecca is currently advising clients on the implications of these reforms. If you would like help with this, please do contact Rebecca. Her details are on screen for you.