It seems that whenever I pick up a newspaper nowadays, I read another news item about changes in employment law. This area of law has always progressed rapidly, but since the general election of May 1997, the amount of new employment legislation – both proposed and in force – is astonishing.

A cursory glance at the statute books illustrates this perfectly. Since May 1997, at least six acts of parliament with a direct bearing upon the employer-employee relationship have come into force. A similar number of bills are making their way through the parliamentary process, and a persistent stream of European directives makes proposals for future implementation into English law.

In the past year alone, the Employment Relations Act 1999 has relaxed the criteria for employees bringing unfair dismissal claims, and increased the maximum award at tribunal from £12,000 to £50,000. The Public Interest Disclosure Act 1998 has introduced a regime of protection and compensation for “whistle blowers”. The Part Time Workers Regulations 2000, in force since July 1, accords part-time workers the same rights as their full-time counterparts.

The indications to date are that employees have not been slow to embrace their new rights. More than 200 claims have been made under the Public Interest Disclosure Act 1998 since it came into force on July 2 last year. Three cases have already been won and a number of others settled. Employers still have to keep a careful eye on all of the existing legislation – for example the Sex Discrimination Act 1975, the Equal Pay Act 1970 and the Race Relations Act 1976.

Employers must bear in mind potential pitfalls at every stage of the employment process. Even individuals who have been interviewed but not employed can bring successful actions.

Nowadays, many larger companies have a sizeable in-house human resources department, staffed by experienced personnel who endeavour to keep abreast of employment law and health & safety issues. These companies tend to purchase the new breed of company liability and entity insurance products in support of their own expertise, in case things go wrong.

But what of small- or medium-sized businesses (SMEs) that can't afford such luxury? How do they cope? Usually in an SME, one or two senior officers are responsible for employment and health & safety matters, but such duties must vie for attention among a number of equally important managerial tasks.

For some employers, the term “legal expenses insurance” has become something of a turn-off, but the spectacular increase in the number of employment tribunal cases has highlighted the benefits of such cover. These policies provide valuable specialist employment advice via telephone helplines, 24 hours a day, 365 days a year . They literally talk an employer through a potential employment problem. Provided the advice is followed, most problems can be overcome.

But valuable ground-up insurance protection is provided in support of such advice, in case an award is subsequently made against the employer. Amazingly, such on-tap advice and protection is generally available at a relatively modest cost, particularly when compared with the hourly rate of a company lawyer.

One company recently called syndicate 702's free legal helpline when they decided to dismiss an employee who had been with them for only three months. As the employee had less than a year's service, the company believed no formal procedure was required for the dismissal.

The helpline advised the company to hold a meeting, inform the employee of the complaints about his work, and keep a record of what was said. The employee offered no comment and was then dismissed. Later, the employee alleged at tribunal that the real reason for his dismissal was his refusal to work the long hours demanded of him, in breach of the Working Time Regulations. One year's continuous service is unnecessary if breach of a statutory right can be shown.

The tribunal dismissed the employee's claim, because of the opportunity for comment afforded to him prior to dismissal. By acting upon the helpline's advice, the insured saved themselves a costly legal wrangle and minimised their potential liabilities.

Insurance can never be an alternative to legal compliance. But support services offered by some legal expenses insurers can help SMEs avoid the many pitfalls created by rapid developments in employment law.

  • Steve Carroll is the Managing Director of R. E. Brown Underwriting Limited, the UK service company of syndicate 702 at Lloyd's.

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