Spiralling legal costs see firms running scared of tribunals

Average legal costs of 4,360 are incurred by firms for every grievance going before an employment tribunal, according to the Confederation of British Industry (CBI).

The CBI claims this means many companies are ready to settle claims even where they believe them to be unjustified and where they have been advised that they would probably win a tribunal hearing.

The employers' organisation conceded that the number of cases going before tribunals has declined since new workplace resolution procedures were introduced last October. But too many firms are said to be still settling cases they have a strong chance of winning because they fear the costs of going to tribunals.

Tim Watts, chairman of the Pertemps Group, said: "Employment tribunals are not always even-handed and often favour the employee. We had one case recently where the employee failed to attend on three consecutive occasions. He gave no reason for his failure to appear. Yet he was granted a fourth hearing when the case was dismissed. We received no costs."

The CBI has called for reform of the tribunal system. In particular, it wants costs in weak and "vexatious" cases to be awarded against losing complainants - although Watts himself noted that, even where costs are awarded against a complainant, it is often impossible to enforce payment.

Over the past year, the number of tribunals has declined by 25%, falling from115,000 to 86,181.