The True Costs of Employment Tribunal Claims

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The True Costs of Employment Tribunal Claims

Key contact: Claire Knowles

Author: Rubel Bashir

Facing an Employment Tribunal claim can be a daunting time. Not only do such claims tie up valuable time and resources, but they can also lead to significant financial implications and reputational damage for employers. In this article, we will explore the various costs associated with defending an Employment Tribunal claim and provide insights to help employers navigate this complex landscape.

Legal fees and representation

One of the major expenses employers face when dealing with an Employment Tribunal is legal fees. Hiring experienced employment law solicitors or barristers to represent company interests can be crucial in building a strong defence, so it’s essential to allocate a budget for professional representation.

The cost of legal representation can vary based on the complexity of the case. The level of assistance needed, the nature of the case, the number of documents and witnesses involved, as well as the duration and number of hearings will all determine the fees incurred.

For relatively straightforward cases that reach a final hearing, a bill of £10,000 to £15,000 can be expected. However, more complex cases can cost significantly more.

The general rule is that each party is responsible for their own Employment Tribunal costs, meaning that even if you successfully defend a claim, you cannot recover the expenses you incurred. There are some exceptions where costs may be awarded, but these instances are limited. It is advisable to seek guidance when considering whether pursuing cost recovery is a realistic option in each case.

Employee compensation

If an Employment Tribunal rules in favour of the employee, the employer may be required to pay compensation. It is therefore essential for employers to account for potential compensation costs and factor them into their financial planning.

The amount awarded depends on factors such as the nature of the claim, the length of employment, and the impact on the employee’s financial situation and emotional wellbeing.

Below is a breakdown of the average award for unfair and discrimination claims in 2021/22.

 Maximum Award (£)Median Award (£)Average Award (£)
Unfair Dismissal165,0007,65013,541
Race Discrimination228,11714,12027,607
Sex Discrimination184,96117,95924,630
Disability Discrimination225,89314,00026,172
Religion/Belief Discrimination35,00025,96819,709
Age Discrimination60,91412,48018,623
Sexual Orientation Discrimination88,36228,38432,680

Loss of productivity, management time and resources

Preparing for and attending an Employment Tribunal means that HR personnel, managers, and other employees must divert their attention from regular responsibilities to focus on the case. This can disrupt workflows, affect employee morale, and potentially lead to decreased productivity during the Tribunal proceedings.

Gathering evidence, preparing witness statements, attending hearings, and dealing with case-related administrative tasks can place substantial strain on management and HR teams. Although your legal team can take on many of these tasks, they will usually need to get your instructions before they are able to finalise documents. Employers should therefore factor in the opportunity cost of focusing valuable management time away from core business operations.

Reputational damage

Employment Tribunal hearings are open to the public and to the media. Furthermore, the findings and judgments are published online and are easily accessible.

The fallout from an Employment Tribunal can have long-lasting effects on a company’s reputation. Negative publicity, whether through media coverage or word of mouth, can harm the employer’s brand image, making it difficult to attract and retain talented employees, clients, and customers. The indirect costs associated with reputational damage should not be overlooked.

Mitigating the costs

Although employers cannot completely eliminate the costs associated with an Employment Tribunal, several proactive steps can be taken to lower them:

  1. Invest in robust HR policies and procedures to prevent potential disputes and claims
  2. Maintain accurate and up-to-date employee records, contracts, and documentation
  3. Implement effective dispute resolution mechanisms, such as mediation or grievance procedures, to resolve conflicts before they escalate to an employment tribunal
  4. Seek legal advice and support to ensure compliance with employment laws, reducing the risk of claims
  5. Consider alternative dispute resolution methods, such as settlement agreements, to reach mutually acceptable resolutions.

Conclusion

Employment tribunals can serve as a wake-up call for employers, highlighting potential weaknesses in their HR policies, procedures, and practices. While the initial cost of an Employment Tribunal may be significant, it can also present an opportunity for employers to re-evaluate their practices, improve compliance, and create a fair and inclusive work environment. By proactively addressing employment issues, investing in legal support, and fostering a positive work environment, employers can minimise the likelihood of facing an employment tribunal and diminish its potential impact on their business.

Acuity Law is running a Mock Employment Tribunal on 8 June 2023 with limited spaces remaining. This event is a rare opportunity to participate in a hearing without the pressure and costs of the real thing. For further information and to sign up, please click here.

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