Election talking points: how will employment tribunals cope with Labour’s proposed reforms?

Labour’s proposals promise the biggest “upgrade” to rights at work for a generation. However, the party seemingly neglects to consider fully how the tribunals will fare. In view of the proposed changes to legislation, we are likely to see an increase in claims which will add to the backlog already seen within the overstrained system. In the fifth article in our series of election talking points, we explain how Labour’s proposals are likely to result in an uptick in claims and what this could mean in practical terms for employers.

An overview of some of Labour’s proposals that could impact tribunals

• Day one right not to be unfairly dismissed - Labour intends to give employees the right not to be unfairly dismissed from their first day of employment. Under Labour’s proposals, employers would still be able to dismiss an employee for failing probation but only after following a fair and transparent process. Labour are yet to give an indication of their preferred route to implementing this change (we considered the three most likely options here) but, whatever the route, this change is likely to result in an increase in claims. When the qualifying period for unfair dismissal claims was raised from one year to two years in 2012, the government said this should see the number of unfair dismissal claims drop by about 2,000 per year. Whether or not it did have this effect is unclear because the government followed this up a year later with the introduction of (significant) fees for bringing a tribunal claim, but it is true that single unfair dismissal claims dropped after the qualifying period was raised. Abolishing the qualifying period altogether is likely to result in a return to higher volume of claims.

• New single status of worker - Labour proposes to create a simple framework where people are either workers or self-employed, and to abolish the current distinction between workers and employees. Although change appears to be some way off, this move is almost certain to create a new wave of litigation testing where the new boundary between worker and self-employed status lies.

• Extension of time limits - Labour intends to extend the time limits for bringing tribunal claims from three to six months. While this may allow more time to resolve complaints through grievance procedures before claims need to be filed, it is also liable to result in more tribunal claims.

The current state of tribunals

In 2023/24, employment tribunal receipts and disposals have increased by 7% and 16% respectively compared to the same period in 2022/23. The total for open cases increased by 3% to 653,000 over the same period.

The changes covered above are likely to increase the number of claims faced by the tribunals, which are already subject to significant delays.

Labour’s main solution to combat the strain appears to lie in their intention to digitise claims. The current government has however already modernised and digitised the tribunal process by introducing the ‘MyHMCTS’ system for submitting claims and responses and corresponding with the tribunal.

It is difficult to see what other measures could be put in place by Labour to improve the tribunal process, resulting in costs savings and providing quicker, more effective resolutions. Labour do intend to issue ‘best practice’ guidance for employers, concerning workers’ rights, which they believe will reduce the number of claims and, therefore, take pressure off the system. The impact that this is likely to have, however, is minimal.

The Conservative government recently consulted on re-introducing (nominal) fees for bringing tribunal claims, to help with the burden of costs (although it was at pains to stress that the purpose of introducing low-level fees was not to deter the number of claims). It is unlikely that Labour will choose to proceed with this plan to introduce nominal fees, but it does not seem to have any other significant proposals to mitigate the strain on the system or improve funding for tribunals.Labour’s other key proposal is to set up a new state enforcement body (likely to be called the Fair Work Agency) to enforce workers’ rights, with powers to fine employers that break the law. A move away from individual enforcement via the tribunal process towards state enforcement via the new Fair Work agency does have the potential to reduce claims, although the remit of this new agency remains unclear. It may be targeted mostly at exploitative practices that do not tend to result in tribunal claims currently.

Impact of further delays on the tribunal process

If – as seems likely – Labour’s plans result in further delays in the tribunal system, what is the practical impact on employers?

Witness evidence

It is becoming increasingly likely that, by the time a claim reaches a final hearing, key witnesses may no longer be employed (especially if Labour are correct with their prediction that giving employees ‘day one rights’ will make them less risk-averse to moving jobs!). This could leave the employer with major gaps in their witness testimonies, which reduces their chance of successfully defending the claim. There are ways to potentially overcome this by:

• Preparing a witness statement at an early stage following receipt of a claim, ensuring that this is agreed, signed and dated by the witness; or
• If the witness has already left the business and is refusing to attend the hearing, applying for a witness order which, if granted, would compel the witness to attend the hearing to give evidence.

Even if a witness statement is prepared and signed, this does not require the witness to attend the hearing. If the witness later left the business and refused to attend, the tribunal would unlikely give much, if any, weight to their statement alone. Witness orders can also be problematic in themselves. The witness is not attending by choice, which may result in a hostile witness, and their evidence therefore being unhelpful for the employer.

The best-case scenario is that the witness is still working for the employer and agrees to give evidence, however lengthy delays will still undoubtedly affect the witness’ ability to recall the events in question at the hearing. Whilst preparing a witness statement early in the proceedings will go some way to reducing the impact of the delays, the witness will still need to answer questions posed at the final hearing and may struggle to do so by that stage.

Increase in management time and legal fees

Although tribunal delays do not necessarily mean an increase to the steps involved in the process, there will often be a substantial gap, either between the case management steps, or between those and the final hearing (or both!). This inevitably results in increased work by the legal representative; for example, re-familiarising themselves with the details of the claim after a lengthy gap, and increased correspondence between the parties and tribunal, therefore increasing fees.

Additionally, further pressure on the tribunal service will likely result in an increased number of hearings being vacated at short notice, most commonly due to lack of judicial availability, as tribunals intentionally ‘overbook’ hearings, with the expectation that they will not all go ahead. This will further drive-up legal fees as the vacations often happen at very short notice, at which point the cost of preparing for, and attending, the hearing is incurred, which will then be payable again when the hearing eventually takes place (often substantially later than the original hearing date).

Delays also mean an increase to the management, HR and in-house legal time spent on assisting with a claim, at further cost to the employer.

Uptick in Alternative Dispute Resolution?

We may see an increase in ADR if claim numbers significantly increase. There are currently four different types of ADR available in employment disputes:

• Acas early conciliation;
• Judicial mediation;
• Judicial assessment; and
• Dispute resolution appointments

Dispute resolution appointments are a relatively new concept. They were rolled out to all employment tribunals in late 2023, having been piloted for three years in the West Midlands region.

A dispute resolution appointment involves an Employment Judge giving each party an evaluation of their chances of success and possible remedy outcomes, whilst being impartial. It is generally listed for cases with a final hearing of 6 days or more. It is the only type of compulsory ADR and could therefore be useful for employers in cases where an employee is reluctant to engage in settlement discussions or has unreasonable settlement expectations.

We are still yet to see these appointments being listed routinely in practice, but perhaps tribunals will begin to utilise these more if claims significantly increase, possibly with a widening of the circumstances in which they will be scheduled.

Conclusion

Whilst we cannot yet say for certain what the impact of Labour’s proposals will be on employment tribunals, we do predict a knock-on increase in tribunal claims and ongoing delays in the tribunal system. For employers, this creates challenges for witness evidence and increased costs. It may also result in increased use of alternative dispute resolution methods.

For more detailed analysis of Labour’s plans for employment law reform and to read other articles in our election talking points series, please visit our election hub.