Legal expenses claims are set to soar as the economic conditions worsen
Insurers are bracing themselves for an increase in legal expenses claims as new data indicates that many employers lack knowledge of correct redundancy procedures.
Allianz Legal Protection said last week that it was receiving a “record number” of calls to its legal protection helpline, Lawphone.
In July 2007, only 2.4 per cent of employment-related calls to the helpline concerned redundancy, but in July of this year, this had risen to a whopping 36 per cent.
With some employers being forced to sack staff as economic conditions worsen, companies are anxious to ensure they follow the proper legal procedure when laying-off people in order to avoid being taken to a tribunal by a disgruntled employee.
Allianz says a number of calls to its helpline come from employers who think the need to make redundancies gives them the opportunity to dismiss “unpopular or difficult” employees.
However, this is a trap that employers often fall into, and which often ends up with them having to take on their ex-employee at a costly tribunal hearing. And the most recent employment tribunal statistics show that the number of cases going to employment tribunals is on the increase.
The Tribunals Service said this week that there was currently no data available on the number of cases handled by employment tribunals in 2007/08, but cases brought before employment tribunals in 2006/07 totalled 132,577, an increase of 15 per cent on the 2005/06 total of 115,039.
The fact is that managers in many businesses, particularly SMEs, have only experienced economic growth and are often unaware of the possible legal repercussions of making staff redundant.
Legal changes since the last economic slowdown include the introduction of the Employment Rights Act 1996 – which makes it much clearer that “sham”, or improperly motivated, redundancies are actionable by employees.
In addition, the Employment Act 2002 has given employees more confidence that they will be able to successfully appeal against a redundancy.
Ian George, a senior solicitor at Allianz Legal Protection, warns that one of the big mistakes made by employers was failing to realise that there must be a period of consultation before a decision is made to lay off staff.
George points out that the law had “moved on” since the last UK economic slowdown. “Employees have greater rights and are entitled to procedural fairness in relation to the dismissal”, he says.
If employers fail to follow the correct processes, an expensive employment tribunal could be just around the corner.
