Employers are seeing their legal bills soar as laid-off workers take them to court to dispute the size of redundancy settlements, says EMW, the commercial law firm.
The number of redundancy pay cases accepted by Employment Tribunals rocketed by 76% to 19,000 in the year to April 1 2010 and a further 8,600 cases were accepted in the six months to October 1 2010.
EMW says that employees might be taking action against their ex-employers because, having been part of a second or third wave of redundancies, they have received a less attractive compensation package than colleagues who lost their jobs first.
Comments Jon Taylor, Head of Employment at EMW: “This is a huge rise in claims well after the wave of redundancies we saw at the peak at the financial crisis, which suggests that with employment prospects remaining uncertain, employees that have been made redundant are more motivated to take legal action over the size of their redundancy pay-outs.”
EMW says that employers that were forced to carryout successive rounds of redundancies would have found it increasingly difficult to offer generous redundancy terms, which could be exacerbating the surge in disputes over redundancy payments.
Jon Taylor commented: “Employers need to be aware that redundancy payouts could be seen as setting precedents. Even rumours about what was received during any first round of redundancy will set expectations and could lead to claims. Departing staff will be particularly resentful if they feel that colleagues who performed less well and so were let go first have been rewarded with bigger payouts.
"One way employers can avoid this is by preventing departing staff members from talking about the terms of their settlement through a clear policy, and taking action if it becomes clear that employees are not abiding by any confidentiality agreements.”
EMW says that the uncertain economy means that employers need to plan for the possibility of future redundancies and review their redundancy processes to ensure that they are as claim-proof as possible.
Taylor added: “If a business’s situation is so bad that it is forced to make staff redundant, the last thing it needs is to be burdened by costly law suits.”