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Unfair dismissal claims peak in bid to avoid new fees regime

Sacked employees rushing to bring in ‘free’ claims before new restrictions kick in  

15 April 2013

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By Manju Manglani, Editor (@ManjuManglani)

Claims for unfair dismissal rose by 44 per cent in a single quarter in response to new incoming UK government restrictions on such claims.

Recently-released data from the Ministry of Justice shows that 15,273 claims for unfair dismissal were made in the three-month period to 30 September 2012, up from 10,581 the quarter before.

However, for the period 1 October to 31 December 2012, the number of unfair dismissal claims dropped to 12,249, suggesting that the majority of people who wanted to file claims prior to the regulatory changes coming into effect may now have done so.

From summer 2013, the Enterprise and Regulatory Reform Bill is expected to introduce a fee for bringing a claim at an employment tribunal and cap the maximum payout for a successful unfair dismissal claim.

“The government’s proposals will significantly limit the advantages of pursuing an unfair dismissal claim against an employer. The government hopes this will reduce dissuade ‘spurious’ claims in future, but the impending deadline has helped prompt a spike in claims,” said Jon Taylor, principal at commercial law firm EMW.

“People have been racing the Enterprise and Regulatory Reform Bill through parliament since it was announced last May, to get their claim in under the current claims regime.”

Under the proposed changes, former employees will only be able to claim up to one year’s pay or £74,200 (whichever is lower) from their former employer for an unfair dismissal. The Bill allows this cap to be lowered in future.

In addition, former employees will now have to pay a fee of £250 to make a claim and a fee of £950 if the case proceeds to a tribunal. There are currently no fees applicable.

Said Taylor: “There will have been a spike in very lightweight claims for unfair dismissal. The incoming changes increase the incentive for sacked employees to launch a ‘free’ unfair dismissal claim now; some people will be trying their luck while they still can.”

“Working through all these extra claims will add to the pressure already on the employment tribunal process. The system is struggling with an ever-growing backlog of cases still to be heard, leaving employers and employees in limbo as they wait for their cases to be resolved.”

“The spike will also include some genuine claims that people have brought earlier than they would otherwise have done. This includes those choosing to resign from a role before the changes come in, in order to bring a constructive unfair dismissal claim on more favourable terms.”

In April 2012, the government doubled the amount of time – from one year to two years – that a person has to have been employed by a company before he can claim for unfair dismissal after a sacking.

“The government’s previous attempts to ease employment tribunal congestion haven’t been a runaway success, while the latest changes appear to have had the opposite to the desired effect, at least in the short term. It will be interesting to see what the impact of these new changes will be,” said Taylor.

Between 1 April 2011 and 31 March 2012, the Employment Tribunals received 186,300 claims, of which 46,300 were for unfair dismissal. Its latest annual statistics will be released on 20 June 2013.

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