Employment Tribunals: What Every Business Needs to Know

There are about 100,000 employment tribunals each year in the UK. Understanding what an employment tribunal entails is crucial for business owners, should they ever be summoned to one. Here’s what you need to know:

What is an employment tribunal?

An employment tribunal resolves disputes between employees and employers. These disputes may involve current or former employees, or even individuals who have applied for positions within your business.

As a business owner, you may find yourself summoned to an employment tribunal if an employee alleges that you've violated employment laws in your treatment of them.

Claims could include:

• Unfair dismissal

• Unlawful pay

• Discrimination: unequal pay or being unfairly passed over for a promotion

• Breach of contract

• Breach of working hours’ regulations: e.g. making an employee work too many hours or not allowing them required breaks

• Unmet payment rights: for example, unpaid wages, paying a salary below the National Minimum Wage, or not accounting for holiday pay

• Unmet parental rights: eg. maternity and paternity leave

• Retaliation

• Employment-related defamation

• Invasion of privacy

• Negligent hiring, supervision or retention

What happens at an employment tribunal?

Employment tribunals aim to resolve disputes between employees and employers. Administered by the independent Employment Tribunal, they operate under the jurisdiction of the HM Courts & Tribunals Service.

The tribunal process often begins when an individual notifies the Advisory, Conciliation and Arbitration Service (Acas) of their intention to file a claim. Acas may attempt to mediate a settlement between the parties through Early Conciliation.

If a settlement isn't reached, the claim proceeds to the employment tribunal. Here, both the claimant (employee) and respondent (employer) present their arguments and provide evidence.

The tribunal issues a verdict and determines any compensation owed by the employer.

Is there a deadline for an employee making a claim?

The deadline for filing a claim is usually three months from the event date, though exceptions apply for redundancy and equal pay claims.

Is it worth attending an employment tribunal?

Employers have to attend if summoned.

What happens if you win a tribunal?

If you win a tribunal and you are not found liable for damages, you won’t need to pay any compensation.

An employee can decide to appeal, however, within two weeks of an employment tribunal’s decision. An appeal must be made on the basis of a mistake made during the tribunal or a new piece of evidence.

What happens if you lose?

If you lose, you may be ordered to:

• Pay compensation to the claimant

• Pay other damages

• Pay witness expenses and other fees

• Give the employee their job back, in rare cases

The recent increase in compensation payouts

Recently, the Employment Rights (Increase of Limits) Order 2024 has been published to account for the 8.9% rise in the retail prices index (RPI) between September 2022 and September 2023.

This Order mandates the implementation of higher compensation limits for employment tribunal claims, effective from April 6, 2024.

The updated limits encompass:

The maximum weekly pay for statutory redundancy payments and basic awards for unfair dismissal increases from £643 to £700.

The maximum award for unlawful inducement related to trade union membership, activities, or collective bargaining rises from £5128 to £5584.

The ceiling on compensatory awards for unfair dismissal climbs from £105,707 to £115,115.

The guarantee payment to employees for a day of lay off increases from £35 to £38.

These adjustments are applicable to cases where the event leading to the compensation or payment entitlement occurred on or after April 6, 2024. For cases arising before this date, the previous limits set forth in the Employment Rights (Increase of Limits) Order 2023 remain intact, as preserved by the latest Order.

Does Employers’ Liability insurance cover employment tribunals?

No. Employers’ liability insurance does not cover employment tribunals, but Legal Protection Insurance or – more commonly - Employment Practices Liability (EPL) insurance can cover costs for a business facing employment tribunal allegations.

What does Employment Practices Liability insurance cover?

EPL provides coverage for legal expenses incurred in defending against claims. It can cover the costs associated with hiring legal representation, court fees and other expenses incurred during the tribunal process – including public relation fees. It may also cover the employee’s wages lost in attending the tribunal hearing and pay for any compensation awarded them by the tribunal.

What it won’t cover are criminal fines, bodily injury, property damage claims or wage-theft compensation.

Employment Practices Liability can be included in a package with your directors' and officers' insurance (you cannot buy it on its own), making it part of an important ‘suite’ of cover.

How is Employment Practices Liability Insurance different to Legal Expenses Insurance?

Legal Expenses insurance can be another add-on to a business’s insurance policy. It also covers legal costs when defending a range of legal disputes.

A fundamental difference between the two products is “prospects of success”.

Legal Expense Insurance (LEI) policies mandate a 51% chance of winning for coverage. They cover legal costs for negotiating settlements with employees but won't cover breaches of employment law.

Employment Practices Liability (EPL) policies, on the other hand, don't require a success clause. They cover defence costs for wrongful employment practices and pay out settlements or awards with potentially higher costs and deductibles. EPL underwriters may request extensive claims history and audits to mitigate risks.

A business of any size is advised to get Employment Practices Liability (EPL) cover to protect itself from financial losses associated with claims of wrongful employment practices - such as discrimination, harassment and wrongful termination – that result in an employment tribunal.

EPL insurance helps mitigate the costs of legal defence, settlements and judgments, safeguarding the business's finances and reputation. It can also provide peace of mind by transferring the risk of potential claims to the insurance provider.

Read more blogs from Ascend:

Understanding Management Liability claims

Why you need Directors and Officers Insurance as a company leader

Any questions? Please don’t hesitate to contact one of our team.

Matthew.collins@ascendbroking.co.uk  | Office: 01245 449060