In an earlier post, I asked this question, but ended up ranting instead about Duncan Bannatyne, the Daily Mail and the other tabloidesque apocalyptica that has surrounded the Equality Act’s passage into law.
This post is an attempt to discuss some actual facts and figures about tribunal claims in general and discrimination claims in particular, with an emphasis on their impact on smaller businesses. Some may be surprised to read that the compensation in many discrimination cases is scarcely more than you would get for unfair dismissal – half of awards are under £5,000 and, as an employer, your chance of winning a discrimination case at tribunal is significantly better.
Disclaimer #1. I am not a statistician. I might have got this all wrong. I’ve ignored the fact that employers in some sectors might get sued more than in others, and the possibility that employees in smaller business might be more or less litigious than those in larger businesses. I just don’t know about that stuff. Some of the figures are rough and ready. If you want to point out where I’ve gone wrong, please submit a comment.
Disclaimer #2. I’m looking at statistics for past tribunal claims, so naturally this does not take account of the new Equality Act. But I firmly believe that, with a few minor exceptions (to be explored in future posts), the Equality Act mainly consolidates existing law and does not create significant new risks for employers. However, time will tell on this, and we’ll see what impact the Act has on the number of claims in future years.
The recession has sparked a rise in claims
Yes, but not as much as people think, and not in discrimination claims. Furthermore, it WILL go down again.
In 2009/10 the total number of claims was 236,000, of which 38,300 were discrimination claims (source: Tribunals Service). I’m not counting equal pay claims as discrimination claims for these purposes. They still tend to be mainly confined to large public sector organisations with defined pay scales. In this article I’m mainly concerned with the claims smaller private sector businesses face.
There appears to have been a massive increase in claims in the last year – 56% up on the previous year and twice what we had in 2001. In fact, there are a number of reasons why this figure is atypical and will drop back again. The recession, obviously, has spawned a lot of dismissals, so unfair dismissal and redundancy claims are up. Stringer has caused a glut of holiday pay claims. And the repeal of the statutory dispute resolution procedures in April 2009 will in my view account for a big increase (just as their entry into force in 2004 caused a sudden temporary dip of 20% in the number of claims). It’s to do with the fact that in 2004 time limits for many claims were increased, causing a slowdown, and now claims have sped up again as time limits have shortened. This is not an increase but a catch-up.
But discrimination cases are NOT on the rise
There’s another reason I would dispute that the sudden spike this year reflects an upward trend or a growing compensation culture. When you isolate the figures for discrimination claims, you see they are pretty static over the last 4 years. In fact, despite overall rise in claims, there have actually been fewer discrimination claims in the last year than in 2006/07 and 2007/08.
Here I have added together the figures for all types of discrimination (race, sex, etc) from the tribunal annual statistics. I have also rounded off the figures to the nearest 500.
- 2004/05 – 20,500
- 2005/06 – 24,000
- 2006/07 – 39,500 (NB most of this rise was due to sex claims. In October 2005 the SDA was amended to make it easier to bring sex discrimination claims based on pregnancy.)
- 2007/08 – 41,000
- 2008/09 – 35,500
- 2009/10 – 38,500
The number of discrimination claims is generally much less than the number of unfair dismissal claims (except in 2007/08 when they were about the same). Moreover employers should be much more worried about unfair dismissal as their chances of losing are much greater (see below).
Will the Equality Act cause the figures to go up? Maybe a bit initially, because of the publicity I expect. Some people predict there will be a surge. Maybe they just hope there will – it’s a good way of drumming up business. I say, let’s see.
0.13% of employees sued for discrimination last year
There are about 30 million working people in Britain. So we’ll say that in the last year 38,500 out of 30 million workers (1 in 780 or 0.13%) brought a discrimination claim. This means if you run a business with 50 employees (NB the majority of businesses have less than this), you will get sued for discrimination once every 15 or 16 years. If you have 10 employees, you should only get sued for discrimination every 75 years or so.
Employers fare BETTER in discrimination claims than other types of claim
What is likely to happen to you when you get to tribunal? Looking at all cases (not just discrimination), the reality is that most cases (just over 2/3rds) are withdrawn or settle through Acas. Settling saves considerable legal costs but usually involves paying some compensation. If you do go to a hearing, however, 66% of hearings overall are decided in the employee’s favour. It varies depending on the type of claim – for example, in unfair dismissal cases, 54% go in the employee’s favour.
However, when you look at discrimination cases, the chances for employers are actually much better. Despite what Mr Bannatyne and his ilk would have you believe about the so-called “reverse burden of proof”, it is actually harder for an employee to win a discrimination claim than any other type of claim. Race and religion claims are the hardest of all to prove: of the 830 race claims that actually went to tribunal hearing in the last year, only 130 (16%) went in favour of the claimant. As an employer you are 5 times more likely to win than lose a race claim at a hearing.
By contrast, sex discrimination claims tend to be easier for employees to prove at tribunal, although the odds are still in the employer’s favour – out of 900 hearings last year, 340 (38%) were decided for the claimant and 560 (62%) for the employer. For some reason sex discrimination claims are much more likely to be withdrawn by the employee than any other type of claim, apart from equal pay claims.
Obviously being sued can take its toll in terms of legal costs and management time, especially for a small firm which is less able to absorb these costs or budget for them. But what about compensation? It’s common to hear the phrase “unlimited compensation” bandied about when talking about discrimination claims, because there is no legal upper limit on compensation. Stories abound of employees seeking hundreds of thousands (or even millions) of pounds in compensation in high profile discrimination cases, particularly some of the more salacious sexual harassment cases arising in the City.
But in reality, compensation is not “unlimited”. It is limited because you cannot claim more than the damage that the discrimination has caused you.
Looked at a bit more closely, compensation consists of two elements: financial loss (loss of earnings) and injury to feelings.
How is compensation calculated?
I’ll start with injury to feelings.
Injury to feelings. There are three bands of injury to feelings award: £600-£6,000, £6,000-18,000, and £18,000-30,000. At the very bottom would be a one-off incident of mild harassment. The very top would be a long and orchestrated campaign of hatred leading to a mental breakdown. The reality is that only 3% of awards are even in the top band. Two thirds (66%) are in the bottom band.
The office joke will not get you much at all.
The lowest injury to feelings awards tend to be in age discrimination cases, where the median is £3,750. Disability cases yield the highest awards, with a median of £6,000. (Figures are for 2009/10. Source: Equal Opportunities Review).
Loss of earnings. This is more difficult to predict. It would be payable where, for example, the employee has either not been hired or promoted, has been dismissed, or has resigned in response to a breakdown of trust and confidence or other serious breach of contract. This is another reason why the office joke won’t result in many claims: jokes do not generally make people resign (even really bad ones). Of course if the joke is the last straw in a long history of harassment, and the employee resigns, it may be costly, but in those circumstances I would advise the employer they have bigger worries than just cracking down on workplace humour.
At the top end is “career loss” compensation, which is very rare and may run into very large figures. At the other end, most people find work within a few months, (although that is obviously harder in the current economic downturn, which explains why compensation figures have risen). In practice, tribunals will put a cap on ongoing loss, to reflect the (almost) inevitability of the employee eventually finding new work. Limiting future loss to 2 years is not uncommon.
Statistics for compensation (2009/10)
|Types of claim||Mean (average)||Median||Maximum|
|Sexual orientation discrimination||£20,384||£5,000||£163,725|
(Source: Tribunals Service, via PLC Employment.)
What these figures show is that the average for discrimination awards is considerably more than for unfair dismissal, probably because of a few very high-end awards (whereas in most cases unfair dismissal was capped at £66,200). However, when you look at the medians, they are much closer together (although disability cases are rather higher). Most of the difference is due to the availability of injury to feelings awards in discrimination cases, I believe. The reality is that for the vast majority of cases, “unlimited” compensation has little impact on the amounts tribunals awarding.
(As an aside, I should mention the CBI are campaigning for a cap on awards in discrimination cases, either at the same level as unfair dismissal or at 2x average earnings – see Gearing up for growth). They say this is in line with EU law and practice. It isn’t. It would be illegal under EU law, as the last Tory government found to its cost before the ECJ in Marshall v Southampton Area Health Authority in 1993. I don’t know why the CBI are pretending not to know this. Marshall is undergraduate law degree stuff.)
Conclusion: just how “dangerous” is equality law?
My calculations suggest that if you are a small business with 50 employees you could get sued for discrimination once every 15 or 16 years. If you have 10 employees it is likely to be once every 75 years.
You are more likely to be sued for unfair dismissal, and much more likely to lose an unfair dismissal case. I think employers should be much more concerned with unfair dismissal than with discrimination.
In about 2/3rds of cases you will be able to settle with the claimant or persuade them to withdraw. If you lose, in most cases your total compensation will come out at a few thousand pounds. Disability cases are the costliest, but even then, most compensation awards are less than £9,000.
I’m not advocating complacency. Litigation risk is a big concern for employers and rightly so. Discrimination cases are time consuming and destroy morale, and the Equality Act should be taken as an incentive for many more employers to get their house in order. I just thought it would be helpful to consider the risks in the light of some actual figures, rather than simply base decision-making on the scaremongering that so often happens in the press.