Age discrimination laws

In early July the UK Government outlined proposals to combat age discrimination in the workplace. The central aim was to protect older workers against discrimination either when applying for a job or whilst already in employment. The Government has until 2006 to implement these, under the European Framework Directive.

The proposals are the latest in a series of measures to introduce fairer employment practices. In April of this year we saw new legislation on flexible working. Under this new legislation, parents with children under six years old now have the right to request flexible working arrangements from their employer.

Employers receiving such requests must follow the strict Government guidelines to the letter. Even if the employer makes a robust business case to decline the request, they may still be fined at a tribunal or even face a claim for compensation if they have not followed the correct procedure.

Further legislative changes are anticipated in December 2003 which will make radical changes to the law surrounding discrimination based on sexual orientation or religion/beliefs.

The benefits to employees of these proposed legal changes are clear and, in the long term, we will all benefit from more flexible and fairer employment practices. However, businesses need to ensure they are fully aware of the potential impact of the numerous changes. Failure to do so may lead them to become the victims of potentially huge employment tribunal claims.

Hiscox estimates that less than 10% of UK companies are covered by Employers' Practices Liability (EPL) Insurance, a specialist insurance which provides cover for legal fees resulting from a claim if brought to tribunal.
Last year alone over 100,000 applications were made to employment tribunals, with a quarter of these progressing to a hearing. This is set to rise as employment laws continue to tighten. Smaller organisations are most at risk and the cost of tackling these claims is estimated to be potentially as high as £140 million.

Indeed, the Government's consultation paper states that age discrimination legislation will have `a significant effect' on companies with fewer than 50 employees. Such companies often lack the human resources capabilities required to fully understand, process and implement these strict laws, or handle the rising number of tribunals that such legislation is likely to prompt.

Businesses should establish what type of insurance they have in place and exactly what this covers them for. For an incremental addition to their cover, EPL insurance will cover legal costs and related damages in a discrimination claim, which could protect some companies from potential ruin if they were to find themselves at the centre of a claim.

Insurance should not, however, be a substitute for good risk management. With such a number of new and complex employment laws being implemented in the UK, it is crucial that employers are themselves aware of their rights and those of their employees. Insurers and brokers should work alongside employment law experts to educate and inform their clients and help ensure that the legal reforms have the intended impact - to protect UK workers and ultimately nurture a fair and balanced relationship between companies and their staff.