April 18, 2013

Employment e-Brief: Lord Sugar – An Example to All Employers?

We know that tribunal claims can be costly, both in terms of time and money. For that reason it is unsurprising when so many employers choose to settle claims early rather than fight on. Standing up for your principles can be an expensive business. However there are times when it is clearly the right thing to do. In the recent case, Lord Sugar clearly felt it was, stating that he felt he had been “cleared of a derisory attempt to smear [his] name and extract money…”.

On hearing the news about Lord Sugar’s successful battle with Apprentice winner, Stella English, I tweeted that it was good of Lord Sugar to defend all the way and that his comments were the closest thing to an advert for employment lawyers that we could get. More seriously though, he may have a point, and ultimately the problem with settling claims is that potential claimants are more likely to assume it is always worthwhile to “have a go” no matter how weak the claim might be. It may become reputational for the employer. The assumption will be that employers will prefer to throw some money at it to “make it go away” than spend the time required to defeat the claim. But is a simple cost/benefit analysis always the best approach?

Ms English had contended that her job was “a sham” and that she had been forced to resign. She had actually worked at two of his companies and resigned twice: she alleged that in relation to the second time, she was forced to leave in October 2011 because of a breakdown in trust and confidence caused by the company’s conduct. As a result she felt entitled to resign and claim constructive dismissal.

She was proved decisively wrong.

It was reported that the tribunal judge had said that this was “a claim which should never have been brought” and that the Claimant had been “ill advised to bring a claim and/or continue it”. The cost/benefit analysis approach would have led to an unjust reward.

Constructive dismissal claims remain reasonably common place but in our experience, they are frequently misunderstood by employees, who too often under-estimate the threshold they need to overcome if they are to satisfy a tribunal that it genuinely was so bad at work that they had no choice but to leave. Employers should understand that before they simply settle for reasons of economics and convenience.

Whilst many employers will be pleased that Lord Sugar is taking this matter up with his colleagues in the House of Lords, they should take note of the reforms which have already been announced. We wait to see precisely what the impact will be of the various employment law reforms currently being pursued by the Government. These include the restriction on the maximum compensatory award a tribunal can make in an unfair dismissal claim which will soon be limited to the lower of £74,200 or one year’s salary (although compensation in discrimination cases will remain unlimited). Rather more importantly, from later this year employees will have to pay a claim issue fee to start a tribunal claim. This reform in particular is likely to put off many a misconceived claim not to mention, potentially, discouraging legitimate claims as well.

For more details about how best to protect your business from employment claims, including options for management training and funding your defence costs, contact a member of the Employment Law Team.

To discuss this e-Brief in more detail please contact Philip Paget employment Partner on 0113 227 0212 or at philip.paget@gordonsllp.com.