Employers fuelling the compensation culture


Employers are fuelling Britain's compensation culture by settling employment tribunals claims before they reach court, fearing massive legal costs and threats to their reputation.

According to business consultants and employment tribunal specialists Croner, settling a claim early is giving the message to 'have a go' employees that if they file a claim, they will receive an out of court settlement from employers.

Robert Kerr, Head of Litigation at Croner, says that employers are too afraid of their staff and should not automatically settle out of court, as long as they always act reasonably and take time to understand their legal obligations.

"The increasing jurisdiction and complexity of employment tribunals mean that many employers need to seek professional representation," he said.

"However, the legal costs in such circumstances can be significant and at times disproportionate to the level of award made by the tribunal.

"Partly for this reason, many employers are settling claims rather than contesting the case at an employment tribunal hearing."

A survey last year by employment law firm Peninsula found that almost nine out of ten people (85 per cent) said that they would be prepared to lie if it meant winning a case against their employer.

Moreover, a similar proportion (87 per cent) said the main reason for them initiating a claim would be the prospect of a big payout.

Meanwhile, a CBI survey of 500 companies found that almost seven out of ten firms believe the number of "weak and vexatious" employment tribunal claims has increased over recent years.

According to Robert Kerr, the 'compensation culture', has been further perpetuated by the media who often give the impression that employees can receive extremely significant settlement payments or tribunal awards.

"This is a misleading impression and, while there are certain high profile cases that have resulted in extremely high payments, this is not the norm," Kerr said.

The highest award made at an employment tribunal during 2003/04 was £635,150, but the average award for unfair dismissal, which constitutes almost half of all claims, was just £7,275.

Even discrimination claims awards are not as high as some may think. For the jurisdictions of race, sex and disability the average awards were all under £30,000.

"Statistics show that the threat is not as great as some may perceive. Rather than worrying about claims, employers need to tackle the route of the problem, which is understanding their obligations to and reasonable treatment of employees," Kerr said.

"Subject to doing this, they should not feel wary about taking appropriate steps to manage staff, and should not fear the threat of massive compensation costs.

"Employers who take appropriate advice and follow the relevant steps to ensure legal compliance are in the best position to deal with claims and to defend themselves at tribunal. If employers believe they have acted reasonably, then they may be best advised not to settle."