Tribunal Statistics Could Keep Employers Awake At Night

Fergal Dowling Employment Law Column

09.10.2009

Statistics have often been treated with suspicion, even before the phrase 'lies, damn lies and statistics' came into common use. They can also, in the views of some, induce sleep.  Employers may be well advised, however, to 'wake up and smell the clichéd coffee' with regard to the statistics relating to Employment Tribunals and Employment Appeal Tribunals (EAT) for 2008/09, not least the increase in the number of claims for unfair dismissal, breach of contract and redundancy pay.

Unfair dismissal claims were up by almost 30% for the twelve month period to March 2009.  There were also two and a half times as many claims where bosses failed to consult workers’ representatives before implementing redundancies for the same period and redundancy pay claims rose by 48%. 

Employers, meanwhile, may want to note that the highest award for unfair dismissal was in excess of £84,000 and the award for race discrimination was over £1.3m.  Perhaps we should at least take heart that the number of sex discrimination cases dropped by 31% to March 09.

I have a number of thoughts relating to this. First, I believe there is a correlation with the rising number of redundancies and dismissals and stress arising from the fear of being out of work and the need to do something about it.  These are, of course, the product of the nation having been in the grip of a recession. 

Second, why do some organisations fail to communicate with their employees and/or representatives and discuss their concerns about job security?  So doing could pre-empt any actions which a minority of workers might feel they need to take with a view to enhancing their career prospects, e.g. soliciting clients or removal of data.

My third query is why don’t companies, that may be unsure of their procedures, simply seek legal expertise before engaging in the process of redundancies and/or dismissals?  It would be far less stressful to involve an employment law expert at the outset rather than face the prospect of potential legal proceedings, the associated costs – in financial and resource terms - and any attendant publicity.

Feedback from senior managers who attend our program of mock employment law tribunals amply demonstrates that these three issues are of serious concern to employers.

The number of employment tribunals between 2008/09 dropped by 4% (or 20% if one includes multiple resubmissions of claims by airline crew).  Any fall may appear to be good news on the face of it, but the total is still 14% up on the level of tribunals for the year to March 2007. 

Figures suggest that costs were ordered in only 25% of tribunal cases so employees may feel it is worth the risk to take a shot at a tribunal, even if the grounds on which they pursue their claim may be tenuous.  That proportion may be encouraging for ex-employees considering tribunal action.

As indicated earlier, legal action is sometimes attributable to existing or former employees whose behaviour breaches contracts of employment, possibly by theft of intellectual and/or other property or unfair competitive advantage through solicitation of clients/employees.

It can also result from previous employers’ attempts to restrict the opportunity of the employee to trade.  Contracts of employment which restrict trade are generally unenforceable. However, they may be justifiable if they protect a legitimate business interest using means that are reasonably necessary, especially relating to the duration, scope and effect of the restriction. Confidential information, customer and supplier details and relationships and preventing the poaching of key staff may all be viewed as legitimate interests.

Any judgement on the reasonableness of a restriction clause will take into account details such as the position or status of the employee, geography of the new venture, e.g. for how many miles from original place of work is the employee prohibited from trading.

The courts have shown an increasingly pragmatic approach in determining the enforceability of clauses, looking at the intention of the clause and not just the literal interpretation.

I have seen an increase in the enforcement/defence of restrictive covenants litigation and actions surrounding breaches of post termination contractual terms, leading to rulings known as ‘springboard injunctions’.  In such instances, legal proceedings come under the High Court.

Injunctions are not designed to prevent an individual from earning a living. Their purpose is to protect the interests of any organisations for whom they had previously worked and ensure that all parties respect the contracts of employment previously entered into.

One key consideration for a court in determining whether to grant an injunction to prevent breach of contractual terms by an employee leaving a business, apart from the actual merits, is timing.  There was a case involving a funeral business, where the employer was aware, several months in advance, of two former employees setting up a rival business. The employer failed to secure an injunction because it delayed in making the application to prevent their actions.

My advice, to any employer considering a reduction in the workforce is to seek expert legal counsel to reduce the risk of becoming a statistic.