In recent years, nearly three-quarters of UK employers have witnessed an increase in legal disputes, according to a survey conducted by global risk management firm Gallagher. Among the legal issues faced by businesses, employee disputes have taken centre stage, accounting for approximately 38% of the cases.

The consequences of these legal battles are substantial: hefty costs, compensation pay-outs of tens or hundreds of thousands of pounds, damage to reputation – and the time you have to spend away from running your business.

What is driving the increase in disputes?

The cost of living crisis and feeling of economic insecurity is one of the main factors. Most business leaders expect the trend to continue. But why do employees feel the need to take legal action?

It is often as a result of a breakdown in internal processes, management and people’s relationships. As a last resort, solicitors, Acas and Employment Tribunals become involved.  In other words, there’s been a failure of skills, capability and culture.

Apart from the most extreme and complex of cases, that shouldn’t happen.

The most common types of legal issue cited by UK businesses are:

  • Employee disputes experienced by 38% of respondents
  • Contractual disputes 35%
  • Financial disputes 34%

Mid-sized companies with between 501 and 1,000 employees are the most likely to have faced litigation over the past five years with over half reporting being subject to legal threats. These rates remain high even among smaller businesses, who do not have easy to  legal expertise, with almost two in five (38%) smaller firms saying they have been subject to legal proceedings.

“While larger companies are more likely to face legal threats, even businesses with less than fifty employees are reporting high levels of litigation against them, challenging the general assumption that legal disputes are only a worry for big business.

 

Concerningly, despite the established upward trend of business litigation cases and a consensus that this will persist, many companies do not feel prepared to manage incoming legal threats, potentially leaving them open to hundreds of thousands of pounds in awards and legal fees.”

Gary Fletcher, Managing Director of the South, Gallagher UK & Ireland

Where there are good relationships within an organisation, those essential feelings of trust and belonging, employees are far less likely to feel the need to turn to the law. It mostly happens when people feel they are not being listened to, they don’t trust managers to deal with disputes or other difficult situations, and believe they have no other choice.

Neither employees or employers want to be in this position. All that is needed is awareness that workplace culture and relationships are important. Straightforward measures like making sure there is access to an informal or formal grievance process  and if needed, a  neutral assessment or appreciative investigation. This can be done by  equipping managers with the skills they need to deal with conflict in constructive ways.

See how we can help here.

Philip McCabe, Partner and Solicitor 30th May 2024

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