2nd November 2018 ❘ Legal News and Commentary

Should we settle an employment tribunal claim?

When an employment tribunal claim lands on an employer’s desk, the usual first reaction is to want to defend the claim to the bitter end.

Many employers will initially feel personally attacked by the claim and will not want to reward an ex-employee for what the employer sees as undeserved legal action.

“It’s about the principle…”

Principles are all well and good, but they can also be costly. An employer should therefore assess all factors of an employment tribunal claim in deciding whether to settle or defend the claim.

In this blog, I have explored some of the factors to consider and these include:

the chances of success
the likely remedy
any wider impact of the claim, in terms of cost, reputation, precedent or employee relations.

Chances of success

Are you likely to win? You should assess your evidence right at the outset.

What written evidence do you have? Who will you need to rely on as witnesses?

An employer should be realistic about what it wants to achieve by defending the claim. Employers may seek vindication by defending a claim, but very rarely will a final tribunal decision point to just one party being wrong.

Remedy

An assessment should be made at the outset as to the potential financial award which the employment tribunal could make if the claim succeeds.

The type of compensation will depend on the type of claim, such as unfair dismissal or discrimination.

The largest part of compensation is usually likely to be loss of earnings and therefore the higher paid the employee was, the higher the stakes at the employment tribunal.

When assessing the possible damages, it is important not to forget that the employment tribunal has power to reduce compensation in claims for unfair dismissal. For example, a dismissal might be procedurally unfair, but if the employer has a strong case to show that there was gross misconduct, then even though the employer got the dismissal procedure wrong, the employment tribunal could still reduce the compensation and this could be by as much as 100%.

The wider impact of settling employment tribunal claims

Not an admission of liability

If an employer chooses to settle an employment tribunal claim, it is not necessarily an admission of liability.

Many employers will make a decision to settle a claim purely on a commercial basis (so as to avoid legal costs and also the expense in management time involved in defending a claim).

It is important to note that this can be done without the employer accepting any liability for the claim.

Avoiding negative publicity

Many employers will also consider settling an employment tribunal claim to avoid the negative publicity of an employment tribunal.

Even if an employment tribunal claim can be successfully defended, employers are understandably concerned about how they will be perceived by the tribunal and by the wider public.

It is important to remember that an employment tribunal hearing is almost always open to members of the public, as is the bundle of documents that is shared with the employment tribunal.

If an employment tribunal claim is settled, then the settlement documentation will usually include confidentiality provisions to prevent the employee from sharing details of the employment tribunal claim (and the settlement terms) with third parties.

Creating a precedent?

The financial and reputational impact of defending an employment tribunal claim should be a consideration, but employers will also want to consider whether settling the claim creates a precedent.

Although any settlement agreement is likely to include confidentiality provisions, sometimes an employer can become known as someone who settles claims. This can lead to further unmeritorious claims being brought by other employees and ex-employees, particularly as claimants no longer need to pay a fee to start a tribunal claim.

Employee relations

An employer should also consider employee relations when considering whether to settle a claim or not.

It is common that defending an employment tribunal claim will involve other employees in the organisation, for example line managers.

It is also possible for a claim to be brought by an employee whilst they are still in employment.

An employer may want to consider the impact the employment tribunal claim will have on employee relations, particularly as the employment tribunal process can last between 12 and 18 months if it proceeds all the way to a final tribunal hearing.

Employment tribunal claims: consider your options

If you receive an employment tribunal claim, then it is important to consider all your options at the outset. Whether to settle the claim or fight it is likely to depend on the specific circumstances of each case, taking into account the factors outlined in this blog.

If you require any assistance with an employment tribunal claim or want to discuss the possibility of settlement, contact Anna Lovett here to discuss further.