Enforcement of contractual and statutory employment rights HR Management

For the vast majority of employees, enforcement of employment rights is not an issue. Good employers, large and small, ensure that employment contracts reflect existing and new employment rights. Moreover, large employers are likely to have a dedicated personnel function to do this. Furthermore, larger firms are likely to recognise trade unions for the purposes of individual and collective representation and this presence is likely to ensure that terms and conditions of employment and internal procedures reflect employee rights, be they contractual or statutory.

In summary, it is not in the interests of employers to ‘short change’ their employees, particularly in a period of full employment when staff recruitment and retention are recognised personnel problems. Equally, if, as many employers claim, employees are the most valued assets within a firm, demonstrating this through good employment practice and not merely in management rhetoric is one measure of being a good employer. However, some employers do seek to shortchange employees by withholding certain rights, such as the minimum wage, or subjecting employees to arbitrary and unreasonable treatment.

If employees feel that a contractual or statutory employment right is either absent or incorrectly proceduralised or not enforced, there are several routes that they can take. Discussion of the situation with a supervisor, line manager or the personnel function may result in corrective action. Alternatively, an employee might raise their grievance with a trade union representative or other employee representative.

Lastly, and more often in cases of alleged unfair dismissal, an employee can instigate proceedings against their employer or former employer by making an application to an employment tribunal. In many cases such an application may be sufficient to persuade the employer that they need to take corrective action. However, some cases will go to tribunal either because the dispute cannot be settled in any other way due to employer intransigence or because an employer feels the case must be defended because of its future implications for themselves and other similar employers.

Employment tribunals are now long established and operate as specialist employment ‘courts’. Tribunals have a legally qualified chair and two lay members acting as employee and employer nominees. Tribunals are less formal than other courts but over the years they have become more legalistic than was originally intended and more time consuming, particularly in situations where a test case is being heard. Virtually all claims in relation to the employment relationship are heard in tribunals; however some, notably claims for constructive and unfair dismissals that involve a breach of contract, are heard in civil courts.

To begin an application to a tribunal an employee or former employee must complete an application form ET1 within three months of the incident or event they intend to complain about. The ET1 will contain details of the employee’s claim and the remedy they are seeking – reinstatement, re-engagement or compensation. The tribunal service will send the ET1 and an ET2 to the employer or former employer; the ET2 summonses the employer to appear before the tribunal.

The employer must also complete an ET3, which details their defence. In 1999 there was a 32 per cent increase in applications to the tribunal service – 164 000, up from 124 000 in 1998; 2000 witnessed a further increase to 167 000, whereas in the year to March 2001 there were 130 408 applications to the tribunal service. However ACAS reported only 94 000 applications to the tribunal service in 2002 (Financial Times, 9 September 2003).

Employer bodies such as the Engineering Employers Federation argue that only 6 per cent of claims against their members are upheld, with 70 per cent settled or withdrawn In contrast, the TUC argues that 95 per cent of cases it backs are won. Moreover, employer bodies argue that there are too many applications to tribunals that employers have to defend unnecessarily as many applications are frivolous or vexatious. Even so, the introduction of a fine of up to £10 000 in such cases in July 2001 has failed to stem the large number of applications. Most applications to tribunals relate to claims of unfair dismissal.

The statutory award for unfair dismissal is made up of two components. First, the basic award of up to £375 for each year of completed employment and second the compensatory award of up to a maximum of £52 600. However, in cases that relate to discrimination because of disability, race or gender there is no upper limit on tribunal awards. For example, a City drinks sector analyst employed by Schroder Securities won £1.4 million in a sex discrimination case after successfully claiming that male colleagues were given six-figure bonus payments while she received only £25 000 while delivering similar results in the workplace.

While denying the allegation, the employer withdrew an appeal against the decision of an employment tribunal. For details of the case see the Financial Times 11 January 2002 and 20 June 2002. While these compensation awards seem large, the average award is much lower in the majority of cases. Equally, in most cases former employees do not get their job back; for example, in 1999 in only 3 per cent of unfair dismissal cases was the applicant reemployed.

Compensation, as opposed to re-employment or re-engagement, is the preferred remedy of most tribunals. There is, in addition to this argument, evidence that employers, and small employers in particular, lack confidence on the issue of employee rights. The DTI found that only 20 per cent of small employers have confidence in their knowledge of employment legislation, with only 50 per cent aware of the employee right to paid paternity leave (see Financial Times 13 August 2002).

The government has recently taken some steps to allow employees to exercise their rights more effectively by compelling employees to follow internal grievance procedures before taking a case to tribunal. This measure, while sensible and reasonable, rests on the premise that all employers have these procedures in place. The evidence suggests that employer claims of ‘excessive red tape’ and the burden of defending unnecessary tribunal applications are not proven. Many employees are denied the opportunity to go through internal grievance procedures. Equally, the growth in employment rights caught some employers – good and bad – off guard, particularly in the area of unfair dismissal.

Employer claims of red tape and the cost of defending at a tribunal must be measured against better regulation of the employment relationship and the need for improved best practice. While the majority of applications to tribunals to enforce employee rights are settled on a voluntary basis and withdrawn, the growth in the number of applications demonstrates the absence of best practice in many areas of employment. Lastly, claims that a ‘compensation culture’ is emerging which is likely to damage the competitiveness of British industry is a very doubtful argument, because if employees win a case at tribunal it demonstrates that their rights were in some way infringed.

Alternatively, if an employer settles a claim or takes corrective action in the workplace, this demonstrates that some aspect of employment practice was poorly proceduralised. High-profile compensation awards involving large sums, such as those associated with the ‘sexism in the City’ cases, are rare if of great interest to the media, but more significantly demonstrate that poor employment practice occurs in all types of employment and that enforcement can be expensive for employers. Furthermore, the actions of some employers in recent cases undermine claims of bureaucracy and red tape and time wasting in the defence of applications to employment tribunals. Applications to tribunals that are withdrawn or settled voluntarily may be settled ‘out of court’ by employers.

For example, Nomura International reached an out of court settlement with an employee made redundant while on maternity leave, who prior to that had been asked to wear short skirts at work and give a male colleague a massage. The former employee dropped her discrimination claim but reached a £70 000 out of court settlement with Nomura, which maintained that the claim was unfounded. In a similar City case, Cru Publishing settled a case of constructive dismissal out of court even though an employment tribunal found that the employee was 75 per cent to blame for her dismissal. While the growth of out of court settlements does undermine employers’ claims of red tape and excessive costs in employment regulation, there are three specific problems with them in respect to the enforcement of employment rights.

First, out of court settlements often prevent full disclosure of the facts and while a former employee may be generously compensated, the provisions of a settlement usually remain confidential. Second, withdrawing a claim and settling out of court often enables employers to deny the charges made against them and, more importantly, prevents the creation of what might be a reference point – a precedent for future cases. Third, an employer that settles a case out of court but denies the basis of the claim may fail to improve personnel procedures – a measure often enforced by tribunals, the Equal Opportunities Commission and the Commission for Racial Equality.

In summary, a well-resourced personnel function staffed by CIPD-qualified practitioners is one route to employer best practice in the area of employment rights; trade union recognition is another, and the latter is likely to lead to negotiation and partnership in the management of employee rights. Both routes are likely to become more fruitful for employers, bearing in mind the likelihood of further growth in employee rights and the medium- to longer-term impact of the 1999 Employment Relations Act.


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