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I spent a day in Britain’s employment tribunals... and found a barmy system that is about to get worse
Vexatious complaints and exaggerated victimhood have created a compensation culture that is only set to intensify
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Rarely do the words “labour market” and “regulation” capture the imagination. Few want to think about work any more than they need to, and regulation is hardly the most scintillating topic. Yet we should care about it much more than we currently do.
Most people believe that employment law concerns little more than working from home or minimum wages. But government rules, the legislation that underpins them and, perhaps most importantly, the decisions made at employment tribunals are shaping not just our workplaces but wider society – in ways that would stir outrage if we paid them more attention.
Did you know, for instance, that it can be deemed “belittling” to call a female colleague “glamorous”, after a tribunal in March concluded it could make them seem less serious and professional? That sending a fellow worker a birthday card when they’d prefer it was kept quiet could now constitute “harassment”, after a tax worker successfully sued HMRC when her bosses committed this terrible offence? No longer is it just slurs or hate speech that are regarded as discriminatory; we can, apparently, kill others with kindness, too.
The list goes on: thanks to one ruling, if an employee offers an older colleague a chair, they could be breaching the Equality Act, leaving their employer on the hook for damages. Then there are concepts such as “the right to request” entrenched in employment law, often loosely formulated and hard to navigate for employers. Should caring for an elderly parent be taken more seriously than a request to spend Fridays at the beach? Many employers will feel unsure as to what leeway they have to turn down a request. But they will know that the consequences can be severe if they get it wrong.
The Equality Act 2010, brought in by the last Labour administration, now governs the employment relationship. There are nine characteristics listed in the Act: age, disability, gender reassignment, marriage and civil partnership, pregnancy and maternity, race, religion or belief, sex, and sexual orientation. While it was introduced with the worthy goal of stamping out discrimination in the workplace (and elsewhere) once and for all, it ended in many cases creating perverse incentives for people to make vexatious complaints and exaggerate their victimhood. Tribunals – the public bodies that hear disputes between employers and employees – can be a messy affair, causing stress for both parties. “[Frivolous claims] are an incredible drain on businesses – and not just a financial one,” says entrepreneur Luke Johnson.
Complaints about apparently minor or jocular staff interactions pepper tribunal hearings. One female worker who complained that her colleagues had nicknamed her “Christine Lagarde”, after the president of the Central European Bank, lost an age and sex discrimination case against Deutsche Bank in January 2023. A Japanese worker tried, also unsuccessfully, to prove that a colleague recommending a sushi restaurant represented race discrimination.
Ethical veganism can, thanks to the efforts of animal welfare workers, be regarded as a protected belief under the Equality Act. Failure to respect it could, therefore, be construed as discrimination. No such luck, however, for veterinary nurse Shakira Free Miles – after a tribunal dismissed her complaint that radical veganism merited the same treatment.
Incredibly, there is now a push to hold bosses to account for harassment against staff by customers. In other words, shop owners could be sued by employees if they suffered abuse from a person off the street.
Though they are meant to be a last resort, every day, cases are being heard in dozens of towns across Britain. In the last quarter of 2023, there were some 24,000 employment tribunal receipts, and there are now close to half a million outstanding claims. According to the Advisory, Conciliation and Arbitration Service (Acas), 76 per cent of cases did not go to a tribunal hearing, and there are nearly 50,000 disposals each year. Nevertheless, businesses are paying large sums not just for compensation but also on legal expenses and management time (one survey found the median number of person days which employers will spend on a case was 8.75).
Hitting the jackpot
In 2014, Dr Eva Michalak, a consultant physician, won claims for sex and race discrimination and unfair dismissal against Mid Yorkshire Hospitals NHS Trust. She was awarded nearly £4.5 million, smashing through the previous payout record of £2.8 million. Half a decade later, her sum was trumped when a male NatWest worker won £4.7 million in damages after suing for disability discrimination, having sustained injuries travelling to his first day of work at the bank.
These are outliers: roughly £12,000, on average, is awarded for an unfair dismissal case, £23,000 for race discrimination, £38,000 for sex discrimination and a little more than £45,000 for those able to prove they were victims of disability discrimination.
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Yet the combination of employment laws that are complex and full of pitfalls, and the substantial cost of the tribunal, has fostered an entire industry with the sole purpose of advising companies on how to navigate equality law. Charles White-Thomson, the former boss of investment platform Saxo UK, describes the environment as “litigious, with law firms keen to exploit breaches or poor process by companies or the employers”. Not unsurprisingly, he says the process is “resource and time heavy… putting particular strain on smaller firms”. Larger companies, meanwhile, are having to hire armies of personnel staff to create watertight disciplinary procedures and protect employees against “injury to feelings” – all in an attempt to avoid the courtroom.
But it isn’t working. Lawyers will attest that, even when the facts of a case are straightforward, a tribunal outcome is unpredictable. The overwhelming majority of claims will not make it to court, yet surveys have shown that many employers settle even when they do not believe themselves fundamentally at fault.
When the Conservatives introduced charges for tribunal claims (these were modest and people on benefits didn’t have to pay), applications dropped like a stone. Total claims in January-March 2014 fell by 75 per cent compared with the same period in the previous year. Sex discrimination claims fell by 81 per cent and equal pay claims by 84 per cent. Then there was a legal challenge by Unison and the Supreme Court ruled in 2017 that the charge restricted access to justice – and the claims took off again.
A day in court
A good way to understand how the system functions in practice is to view a tribunal in person, as they’re open to the public. So I visited one on Kingsway in central London. Its security protocols were stricter than those of an airport or the Houses of Parliament. I walked in on day two of an unfair-dismissal case and sat down alongside three other observers.
The judge, one of two lay members, the two lawyers and their advisers were all women. The male witness looked like a fish out of water. Ruddy, flustered, he spoke for around 45 minutes and was expected to recall conversations and events from months – if not years – ago. The legal documentation and swearing oaths on a bible added to the intimidatory atmosphere.
The claimant’s solicitor was a rottweiler in stilettos; I found myself wondering whether this particular case was truly the best use of her talents. A similar thought crossed my mind during the rare moments the chairperson chipped in. Then I googled the average salary for employment judges: £108,171; the taxpayer foots the bill.
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The paperwork involved was jaw-dropping. Ringbinders, described in lawyer-speak as “bundles”, ran to hundreds of pages. It is referred to throughout: “Please look at the email which you sent to the applicant on July 12. You’ll find this on page 300. Have you got it?”
Within moments I understood why, even for the most scrupulous employer, these cases must feel like a roll of the dice. The defendant was on the rack for delays in progressing the disciplinary procedure, though it took place midway through lockdown. The employee had broken “unwritten” rules; who could prove awareness of them if they were not in the staff handbook?
When tribunals were first introduced, the idea was that they would provide informal ways of resolving issues outside the traditional court system, and would bring in people with experience in the real world of work. Now, they are forums for Perry Mason-style interrogation of relatively junior managers and HR staff whose own culpability for any errors is often indirect and remote.
Stress and the settlement cap
Are the dice loaded against the employer? It’s certainly the case that tribunals are no picnic for the claimants. James Davies, a partner at law firm Lewis Silkin, tells me it isn’t uncommon to wait more than a year for a case to be heard. It is also stressful and costly. Much as the government has tried to legislate against it, some staff are still poorly treated and genuinely wronged by their employer – and they need a mechanism through which to seek justice.
But, for some claimants, a speculative application is a one-way bet. It costs them nothing to put a claim in and there is a fair chance they will be made an offer by an employer who wants to avoid the costs of lawyers and possible damage to reputations. Many bosses will lose based on process rather than because they were fundamentally at fault.
“Lawyers will very often seek to claim discrimination on some grounds or another,” says Neil Record, the founder of Record Currency Management. “This is logical behaviour, because to be found to have discriminated against an employee is not only potentially financially damaging, it is severely reputationally damaging, too. So, faced with such an allegation, however spurious or lacking in evidence, an employer will want to negotiate a settlement with the ex-employee above the cap of one-year’s salary, and sometimes way above.”
If a court or tribunal rules that discrimination is behind a firing decision, the compensation cap for unfair dismissal – currently one year’s salary or £115,000, whichever is lower – is removed. One former chairman of a public company warns that “teams of employment experts who know the law and will also be familiar with the behaviour of both employment tribunals and employers, will encourage a discrimination complaint to break the cap”.
Their job may have been made easier by a tribunal ruling last November which concluded that Britons who suffer work-related stress can sue their employer for disability discrimination. As employers and doctors will know, stress is a phenomenon for which the medical basis is highly debatable: unlike visible disabilities, the symptoms are extraordinarily difficult for employers to recognise and evaluate. Of the 85,000 claims made in 2022/23, some 15,000 involved race, sex or disability discrimination (though some claimants will bring more than one claim).
You know the situation is dire when Britain is being compared unfavourably with France, where there is no cross-examination of witnesses and hearings typically take a fraction of the time. “It’s much quicker and much easier there,” says Davies, who recently watched a harassment case complete in half a day.
Drowning in red tape
Employers in Britain are finding more and more of their time is being absorbed by adherence to ever-expanding labour market regulation, with small businesses in particular buckling under the burden. Human resources is becoming one of our fastest-growing industries: according to the Office for National Statistics’s (ONS) annual survey of hours and earnings, around a quarter of a million British workers have “personnel”, “industrial relations”, “training” or “HR” in their job title. How many could honestly say they are contributing to their company’s bottom line or the nation’s productivity? How many could deny they are stoking this issue by pushing for more rules in order to expand their own teams and budgets?
Already, our minimum wage is the eighth highest in the Organisation for Economic Co-operation and Development (OECD) once adjustments are made for exchange rates and prices. The government closely regulates hiring and firing procedures, entry into pensions schemes, holiday allowance, sick pay, maternity pay, the number of hours that can be worked, the statutory minimum length of rest breaks – the list goes on. The benefits to all these laws are obvious, yet it doesn’t seem to be making us any happier. People complain as much as ever about stress, pay, dissatisfaction and poor management.
If regulation acts as a “stealth tax” on employment, then this cost will be passed on to workers in the form of lower wages. An inability to fire will disincentivise firms to hire, which, between red tape and HMRC, is unappealing enough already. Some groups will suffer more than others; firms will try to avoid the impact of regulation by, for instance, recruiting fewer staff likely to make significant use of mandated benefits such as parental leave. They will switch resources to areas that are not so highly regulated, for example by moving production abroad, or make greater use of self-employed contractors.
Then there’s the correlation – not causation – between labour market regulation and our stagnating productivity rate. Output per worker increased just 0.1 per cent in the year to April. In the public sector, it has yet to reach pre-pandemic levels, a full three years after lockdown ended. Productivity is key to raising wages and living standards. But the more “rights” we hand employees, and the more requirements we place on businesses, the more growth is being held back. Economists have suggested that the sharp decline in London’s productivity (by 2.7 per cent between 2019 and 2022, according to the ONS) may be linked to the rise in working from home.
Make it harder to dismiss the lazy, late and entitled, and two problems follow. First, employers – small businesses in particular – will be disincentivised from taking on new staff. And second, at a time when worklessness is soaring, hard work could begin to look like a mug’s game. How will staff who do give their all at work feel when they see apathy rewarded? Why put in the effort when others don’t and still pick up a paycheck at the end of every month?
Ill feeling among staff is already an issue, Record warns. “Employees are not particularly concerned, in my opinion, with the details of unfair dismissal proceedings, but they do (and this is common) resent the leeway that is often given to legally privileged employees (generally women and ethnic minorities).” And they are legally privileged because any alleged mistreatment could trigger a discrimination claim, which Record describes as “truly frightening” for an employer.
White-Thomson insists that companies must be able to manage their workforce efficiently, and this includes hiring new talent while “letting go”, with “due process and care”, employees on performance, behavioural, restructuring and profitability grounds. Yet the process is “not easy, favours the employee and will sometimes throw up legal shenanigans with the aim of increasing redundancy terms”.
Things can only get worse
Now Labour wants to take all this further, with deputy leader Angela Rayner planning the biggest shake-up of employment rights in a generation. Under its proposals, there will be day-one rights to parental leave, sick pay and protection against unfair dismissal. Currently, employees can only usually claim unfair dismissal against an employer if they have a minimum of two years’ service.
It is this change, Davies tells me, that worries some business owners the most (small and medium enterprises much more than bigger companies). How can they know within minutes whether remote working is feasible for a new employee? Also on the table is a ban on zero-hours contracts. The Left consider these “exploitative”, yet many of those using them are students, second-earners and those seeking extra work on top of their normal jobs.
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But it is the Race Equality Act that will be most damaging, because firms could face legal action if they pay staff of different ethnicities varying wages for doing similar – not the same – roles. If companies with more than 250 staff are forced to report their ethnic pay gaps, replicating the existing obligation to publish gender gaps, the result will be both divisive and counterproductive.
As Tony Sewell, who was chairman of the Commission on Race and Ethnic Disparities tasked with looking into race disparity in the UK, says: “The 2011 Census data shows that of the 650 constituencies in the UK, 437 are more than 90 per cent white, so many employers around the country simply do not have enough ethnic minorities for the recording sample to be valid.”
Bosses may be left with a binary choice: hike the pay of more junior ethnic minority staff in order to avoid a PR storm, or stop hiring ethnic minorities into junior roles.
Britain desperately needs to move away from the position that everyone can be kept perfectly happy in work at all times. They can’t, and government attempting to legislate for contentment by piling regulations onto businesses will bring all manner of unintended consequences. There is no doubt that some workers need protection from unscrupulous bosses. But the Labour Party ought to ask whether bosses might need protection from opportunistic employees, too.