Law of the jumble

Confusion often reigns when trying to keep up to date with rapidly changing employment laws, particularly those concerned with discrimination in the workplace. Peter Dobie offers some guidance on what the future is likely to hold

Companies of all sizes are struggling to keep up to date with employment law. Even firms with dedicated human resources departments are under pressure to keep up to speed with the constantly changing legal landscape, much of it driven by Europe.

The latest figures from the Employment Tribunal service show that the number of cases in the UK rose by 17% last year. The biggest rise was in cases of sex discrimination, which rocketed by 76%. Recently, British Airways was in the news following the decision of 12 of its stewardesses to take the airline to a tribunal, claiming their promotion prospects were harmed when they were put on part-time contracts after having children.

Last year also saw a rash of cases from Job Centre workers following the case of a male employee who won his case for discrimination because he did not want to wear a tie. Matthew Thompson of the Stockport branch felt it unfair he was required to, when female workers were not.

Although the Department for Work and Pensions has now been given leave to contest this by the Employment Appeal Tribunal, it is clear that balancing control in the workplace with discrimination laws is a minefield. And, of course, for small and medium-sized enterprises it can be even tougher because they often do not have professionals who can advise on risk mitigation and best practice.

A recent study from employment relations service ACAS showed that one in four small businesses were "not at all" or "not very" familiar with new rules banning discrimination against gay, lesbian and transgendered people and those with minority beliefs. It is also interesting to note that just over one in five in the survey admitted they did not have access to the right kind of information and expertise required to deal with workplace disputes and grievances.

Rising costs

Many of these businesses will not be aware that costs can run into thousands - the current limit of an award for unfair dismissal, which remains the most common reason for a tribunal, is £55,000 while there is no upper limit on compensation in discrimination cases. And this is exacerbated by the time involved - a hearing for a relatively straightforward case may only take a day or two, but time taken to prepare for the hearing can take weeks.

Clearly, there is a marked need for greater take-up of commercial legal expenses insurance and beyond this, expert advice on an ongoing basis from a solicitor.

Legal expenses insurers have taken different approaches to handling their commercial clients. Some will offer cover and handle the relationship with the business directly, putting the insured in touch with a law firm should the need arise.

Others act as a carrier of the risk first and foremost, where the insurance adviser is the broker and the party responsible for legal advice is the solicitor. This approach requires a thorough vetting process of lawyers joining the scheme to ensure they are employment law specialists with a proven track record.

Future policyholders are required to undergo a risk assessment survey conducted by the law firm - even though they will be required to bear the cost. It is about taking responsibility, and for the lawyer that means there is a thorough understanding of how the business works and where potential problems lie.

The solicitor will then be available to advise on a range of issues such as stress in the workplace, disciplinary procedures, handling redundancy, equal opportunities and avoiding unfair dismissals. The aim is to prevent claims occurring. Apart from the cost and time involved, it also helps protect the client's reputation.

Following the risk assessment survey, the solicitor will then prepare a report that highlights areas of concern, which in turn assists the broker.

It is of more benefit for the client if the broker, who acts as an independent agent, advises on the cover that is necessary.

Smaller firms in particular may have budgetary restraints on what insurance they can buy, but some legal expenses policies can be too comprehensive - containing aspects that are not relevant to a particular business. It is important, therefore, to select an insurer that can provide tailored cover - for example, a company may be most concerned about discrimination and so want cover solely for this. Other ways of making legal expenses cover more affordable are to take a deductible and the broker should be able to recommend an insurer that can offer this.

In the future, there is likely to be more scope for brokers, solicitors and insurers to work closer together. The imminent deregulation of the legal services sector following the Clementi Review is set to create a more open legal market and the arrival of big brands. But, while 'Tesco Law' may be there for the consumer on the high street, there is no reason why brokers and lawyers cannot link up to offer commercial clients an integrated service, encompassing risk management, regular employment law updates and insurance guidance.

Lack of cover

In light of increasing litigation, talking to clients about commercial legal expenses insurance has never been more crucial and it is surprising that only a third of SMEs have this cover. It also makes sense, given the arrival of statutory regulation by the Financial Services Authority, as brokers need to provide the highest standards of advice. It is worth noting that lawyers are not required to obtain authorisation if they are working with clients covered by legal expenses cover - the FSA recognises the Law Society as the regulator.

Managers and their companies bear overall responsibility for employment practices, but no matter how sound procedures, in reality it is impossible for any business to say it is immune from a legal dispute. The rapidly increasing amount of employment laws in the UK means outside support and the safety net of insurance is invariably essential.

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