How do employment tribunals affect you?

Begbies Traynor's Nick Hood explains how changes to the tribunal system are both good and bad for bosses

A landmark ruling by the Employment Appeal Tribunal in July 2004 brought relief to those employers who feared that unfair dismissal claims could escalate to horrific proportions through the inclusion of additional compensatory awards for hard-to-define matters such as personal humiliation, injury to feelings or stress.

In a recent case, an environmental officer in the North East was awarded loss of earnings, but his additional claims for non-financial damages were thrown out. The judgement made it clear that only claims for “quantified pecuniary losses” can succeed through a tribunal. However, we should not lose sight of the stark fact that even these can go up to a fearsome maximum of £55,000.

It is likely, of course, that employees will continue to seek compensation for non-financial damages, but in future they will have to run a separate action through the civil court system alongside their tribunal case, with all the difficulties and potential costs inherent in proving these more intangible claims.

But sadly, changes outlined in a new government White Paper on the tribunal system are not exclusively beneficial to employers. The proposed shake up of the system is designed to make it easier for successful claimants to force their former employers to pay the compensation awarded against them.

Employers who have experienced the sometimes inexplicably rough justice meted out by tribunals will shake their heads in amazement at the suggestion in the White Paper that “every appeal is an away game for tribunal users”.

The Government’s reforms are also aimed at encouraging the resolution of disputes without the need for formal hearings. Professional mediators who specialise in employment matters may soon be very busy indeed.

Wherever the balance of power finally settles in employment law, the owners of start ups must be vigilant about the risks they face whenever they employ staff. The financial penalties for not giving due care and attention to this vital area are enough to destabilise a well-established business, never mind one battling with all the other challenges that come with new enterprises.

Add to this the distraction of a tribunal case for over-stretched entrepreneurs and you have a recipe for potential disaster.

Therefore, startups must do their utmost to practice good employment techniques. Issue everyone with a contract, which is a legal requirement, a job description and a copy of the company’s employment terms and conditions, including grievance procedures.

This paperwork is available in standard format from many sources, including local solicitors, trade associations, chambers of commerce and a host of specialist employment websites and can be adapted for your particular needs.

You must also be able to draw on a source of down-to-earth employment advice – either from an human resource professional or a practical lawyer. If in any doubt, check out the legality and consequences of your actions, because the downside of getting it wrong can be horrendous.

A natural tendency in small businesses is inadvertently to take staff for granted; because you all work together so closely, you feel you and your employees are like a family and any issues that do arise can be defused over a chat and a cup of tea. Staff issues must be taken seriously; don’t kid yourself that friendship will solve problems or assume that others will give up their rights for the greater good of the business you own.

As a final cautionary note, thousands of small firms already breach existing employment laws and are unintentionally discriminating against staff, largely because of poor recruitment and management processes.

People often tell me that having full scale HR procedures is over the top for new businesses, but wouldn’t you rather have the sledge hammer in your hands, rather than being the nut under the gavel of an unsympathetic employment tribunal?

Nick Hood is a partner at Begbies Trayor. You can contact the law firm by going to or calling 020 7398 3800.


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