Hundreds of plumbers are paying for worthless legal fees insurance to cover employment tribunals, according to HR compliance advisor HR4UK.
Many plumbers take out insurance against the costs of fighting claims at employment tribunals. These can be either as standalone policies or as 'add ons' to employers' liability or other policies. HR4UK believes insurance companies always write these policies on the basis that they will only cover claims that have more than a 51% prospect of being successfully defended - cases where they assess the employer has acted incorrectly will not be covered.
Premiums for this type of insurance before August 2013 were set to reflect the large number of ill-conceived or spurious employment tribunal claims filed by disgruntled employees.
However, the rules for bringing claims to employment tribunals changed in 2013. Ex-employees must now go through Acas Early Conciliation before they can lodge a claim, and must also pay up to £250 when they file the claim and a further £950 before there is a hearing. This has had a dramatic effect on the number of claims being lodged, which have since fallen by 79%.
Peter Abraham of HR4UK said: "The reduction in the number of claims means the risk of an employer who has attempted to comply with the law being taken to an employment tribunal for a misconceived claim is now much lower than it was just over a year ago.
"What's more, because there are now costs to the employee of bringing a claim, only cases where the claimant is likely to succeed are being pursued. These are the very cases where insurance companies believe the employer has less than a 51% chance of success and are therefore much more likely to refuse to cover.
"These two factors together mean that businesses are paying for insurance which is of dubious benefit. Insurers have generally not significantly, if at all, reduced their premiums. They are creaming in profits on this area of business - especially as many small businesses simply renew a policy without reviewing its costs and benefits."
Until recently, as part of its services, HR4UK offered a complimentary insurance to clients to cover the cost of fighting employment tribunal claims. Due to the legal changes that have taken place, the company is no longer doing so as it sees insufficient benefit to its clients. Instead, it is providing free representation in Acas Early Conciliation negotiations and employment tribunals using its expert team of employment lawyers and barristers.
Mr Abraham added: "We no longer see a need for legal expense insurance to fight employment tribunal claims when the misguided and ridiculous claims that flooded the system in the past are simply no longer there. So we are offering to provide free representation in Acas Early Conciliation negotiations and employment tribunals up to £20,000 per claim to our clients - provided they follow our system. They do not even have to ring us for advice."
Photo caption: Peter Abraham of HR4UK.