Human resources advisor claims store operators and other companies are paying for employment tribunal cover that they probably don’t need.
THOUSANDS of small retailers and other businesses in the UK are paying premiums for legal fees insurance that is largely worthless. That’s the claim from human resources advisory firm HR4UK.
Many companies take out insurance against the costs of fighting claims at employment tribunals, some as standalone policies and some as add-ons to employer’s liability or other policies, it says.
But, the HR firm argues, insurance companies typically only cover claims that have more than a 51% prospect of being successfully defended. So, cases where they assess the employer has acted incorrectly will not be covered.
Premiums for such insurance set before August 2013 reflected, HR4UK says, “the large number of ill-conceived or totally spurious employment tribunal claims filed by disgruntled employees”.
However, the rules for bringing claims to employment tribunals changed in 2013. It is now a requirement that ex-employees go through Acas Early Conciliation before they lodge a claim; they must also pay a fee of up to £250 when they file the claim and a further £950 before there is a hearing. The effect on the number of claims being lodged has been dramatic – the overall number of claims has fallen by 79%.
Peter Abraham, founder and managing director of HR4UK, said: “The reduction in the number of claims means the risk of an employer who has attempted to comply with the law being taken to an employment tribunal for a misconceived claim is now much lower than it was just over a year ago.
“What’s more, because there are now costs to the employee of bringing a claim, only cases where the claimant is likely to succeed are being pursued. These are the very cases where insurance companies believe the employer has less than a 51% chance of success and are therefore much more likely to refuse to cover.
“These two factors together mean that businesses are paying for insurance which is of dubious benefit. Insurers have generally not significantly, if at all, reduced their premiums. They are creaming in profits on this area of business – especially as many small businesses simply renew a policy without reviewing its costs and benefits.”
Until recently, as part of its services, HR4UK offered insurance to clients to cover the costs of fighting employment tribunal claims. It’s no longer doing so.
Peter Abraham said: “We tried to renegotiate the insurance policy but, despite the huge reduction in risk faced by the insurer, we were being asked for a premium that was little different to what we have paid in the past.”
Now, instead of the insurance, it provides free representation in Acas Early Conciliation negotiations and employment tribunals using its team of employment lawyers and barristers.
“We are so confident in our advice and systems that we no longer see a need for legal expense insurance to fight employment tribunal claims when the misguided and ridiculous claims that flooded the system in the past are simply no longer there,” said Abraham.
“So we are putting our own money where our mouth is and offering to provide free representation in Acas Early Conciliation negotiations and employment tribunals up to £20,000 per claim to our clients – provided they follow our system.”
• Changes to employment tribunal arrangements are being challenged in the courts.
In May trade union Unison was granted permission to appeal the High Court’s decision turning down its judicial review application over tribunal fees. The Court of Appeal decided the basis of the issue was of “sufficient general importance to merit permission to appeal”.
In the High Court last year, Unison challenged the UK government’s decision to introduce employment tribunal and employment appeal tribunal fees. The union argued that the introduction of fees would deny access to justice for workers treated unfairly by employers and would be unlawful, and that the introduction of fees has a disproportionate impact on women.
Unison said it will ask the Court of Appeal to consider figures released in March this year that showed employment tribunal claims dropped by 79% in the first six months after the application of fees.