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Focus on damage limitation in employment disputes (May 2011)

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Human Law Ezine - May 2011

Focus on damage limitation in employment disputes

Last week employment relations Minister Ed Davey said the Government was reviewing the future of key employment rules which it considers to be 'red tape.' This includes collective redundancy consultation periods, the Transfer of Undertakings Protection of Employment Regulations (TUPE) and levels of compensation for discrimination awarded by employment tribunals.

Speaking to the Institute of Economic Affairs. Mr Davey said: 'We will be looking carefully at the arguments for reform. Fairness for individuals will not be compromised – but where we can make legislation easier to understand, improve efficiency and reduce unnecessary bureaucracy we will.'

It is clear that ministers believe TUPE rules, which apply to both the public and private sectors can be 'overly bureaucratic'. Under TUPE staff who are transferred to another employer have their existing terms and conditions protected. There is also interest from the government in trying to reduce discrimination awards.

Whilst I would broadly welcome steps to simplify the rules and limit discrimination awards, you can’t get away from the fact that tribunal claims are just the tip of the iceberg when it comes to employment disputes. The vast majority of employment claims do not reach that high a level, yet they still have a significant impact on the businesses and individuals involved.

Furthermore, the government is limited in what reforms it can make due to European law.

Reputation management
If the government wishes to get both employers and employees motivated about settling claims sooner, it may wish to ask both parties to start objectively considering the damage done to both of them by a dispute continuing.

Why not focus less on changing the rules but instead on educating the parties of the damage of litigation?

The costs do not just include compensation awards and legal costs but also lost time, lost business and damage to reputation.

In a related matter consider the damage done to BP by the oil spill in the United States last year. Notice how the damage done to the organisation is like a ripple pond. It extends far and wide. The "hidden" cost of reputation will usually outweigh the production losses which an organisation experiences from a dispute.

Gower Publishing whom I have written for, inform me that companies generally suffer almost ten times the financial loss from damaged reputations than from whatever fines may be imposed. According to Ernst & Young, the investment community believes up to 50 per cent of a company's value is intangible - based mostly on corporate reputation. So recognizing potential threats, or anticipating risks, emerges as a critical organisational competence.

In an employment dispute it is not just damage from press coverage, but rather what employees say about the organisation to other people.

Once parties start working on the damage done to them by disputes, they will become more motivated to settle.

Settle at minimum cost
And of course there are any number of ways you can settle a dispute without going to Court:

  • Nip the problem in the bud: too often management allows a problem to stay festering rather than dealing with it.
  • Manage the conflict: rather than dealing with the conflict as it flares up, you can deal with it in a structured way. This means having an action plan for preparing and meeting the parties and attempting to resolve the conflict piece by piece.
  • Mediate: you can formally allow for an external person to mediate the case. In our experience having someone external can solve the problem as their independent viewpoint can bring clarity, and also reassurance for the employee that they are being heard.
  • Negotiate: you can negotiate directly with the parties making an offer to solve the matter.
  • Get an external professional to give view – if you cannot sort this out yourself, why not asks someone with employment law expertise to give a written view to both parties. This is called Early Neutral Evaluation and can be an excellent way to solve workplace disputes.

From the employee perspective, in my experience many who obtain awards achieve victories which are not necessarily cost effective or personally satisfying. Therefore they can be motivated to settle as well.

For advice on how to handle conflicts at work and for training for managers on mediation and conflict management skills contact Justin Patten here

 
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