Alan Sugar Fought an employment (against legal advice) and won

On 29th July, new employment tribunal procedural rules came into force, the most controversial of which now require employees to cough up to £1,200 for unfair dismissal and discrimination cases.

The government’s purpose in introducing fees was to weed out the many frivolous claims that have little chance of success and waste considerable amounts of time and money of employers. The new rules are also an attempt to reduce the £75M a year overall cost to the taxpayer.

Business groups have come out in support of the changes, agreeing with the government that they will help reduce speculative or weak claims. However trade unions have criticised the move as unethical and an attack on justice; they argued that it may prevent people from exercising their employment rights, but have conceded that many of the claims are ridiculous and that the changes will reduce this type of claim

The unions also claim that bosses will now be less likely to obey their legal duties because of the reduced risk of a challenge by staff. Employers have dismissed this claim as disingenuous and point out that there is a scheme for those on lower incomes where they can apply to have the fees waived.

A few years ago, Morgan Jones & Co were taken to the tribunal for unfair dismissal; the claim was considered “vexatious and without foundation” by my solicitor. However, when it was eventually settled, it had cost us over £6,000 in tribunal fees and legal costs, not to mention two weeks out of my life, whilst my former employee paid nothing. In 2012, the average cost of defending a claim had risen to £12,000, a huge cost to a small business in the current climate.

More recently, I had to consult our solicitor over an employee that we were considering letting go but I was concerned about a possible claim. The legal advice was that although my case was potentially very strong, I should pay the staff member 3 months’ salary (£3,750) as it would cost me at least 3 times that figure, even if I won. Our legal eagle went on to comment that, “the one sided costs involved mean that employees can effectively blackmail employers for a settlement”.

Hopefully the change in rules will remove that option and only people with a valid claim will bring forward actions.

Tribunal fees explained

With effect from 29th July, if an employee wants to issue a claim against an employer in the employment tribunal, they will be required to pay a fee first, which involves payment of an issue fee both at the time the claim is lodged at the tribunal and also when it is brought to an actual hearing.

The fees for a single claim are:

Level 1 claims (Straightforward matters such as unpaid wages and redundancy payments):

Issue fee £160

Hearing fee £230

Level 2 claims (All other claims, such as unfair dismissal, discrimination and equal pay):

Issue fee £250

Hearing fee £950

In addition further fees will have to be paid for any preliminary hearing (£100), Employment Appeal Tribunal fees of £400 for an issue fee and £1200 for the hearing fees and any multiple claims will attract both higher issue and hearing fees.

Also employers will be able to engage in “pre-termination negotiations” with an employee even where no formal dispute has yet arisen, without fear of it being used against them.

The changes also mean now the maximum compensation that can be awarded for routine unfair dismissal claims is set at a maximum of 52 weeks’ pay or £74,200, whichever is the lower. This in effect means, securing more than a year’s salary is out of the question, no matter how long it takes you to find another job.

For more information on the subject, go to: http://www.justice.gov.uk/tribunals/employment



David Jones is the Senior Partner and Founder of Morgan Jones & Company. Born in Liverpool and a graduate of Liverpool Collegiate Grammar School, David spent twenty years working for the Customs & Excise in London then Shrewsbury before starting his own business. David’s depth of knowledge of the UK tax system and his ability to communicate this learning has seen Morgan Jones & Company grow into Shropshire’s most respected Accountancy Practice. Email David

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