As we enter what will likely be a severe economic downturn, dealing with the colossal impact of Covid-19 compounded with the UK’s withdrawal from the European Union, many uncertainties lie ahead. One thing that we are quite confident of though, is that workplace litigation is going to become significantly more common.
Businesses across all types of industries will be forced to make redundancies. Many will sadly become insolvent. Employees, shareholders, or even fellow directors will want answers and, possibly, financial compensation if they believe things could have been handled better.
The number of employment tribunal claims were already on an upward trajectory for years before the Covid-19 pandemic hit. The abolishment of tribunal fees in 2017 removed the financial barrier for claimants, whilst largescale social movements, such as ‘Me Too’, has rightly put previously unchallenged workplace inequality and discrimination in the public eye.
However, whether an allegation of misconduct is genuine or not, it still needs to be defended. Those who are successful in their defence are rarely able to reclaim their legal costs from the unsuccessful claimant, as is usually the case for other forms of civil litigation. This means that even a successfully defended tribunal will usually still leave the employer out of pocket by tens of thousands of pounds. This will be the case for companies making redundancies too.
Even if professional legal and HR advice has been closely followed throughout the entire process, an allegation still needs to be defended. With a lack of jobs and an abundance of competition, those facing long-term unemployment may feel encouraged to challenge their former employers on their handling of the process.
Most companies nowadays are aware of the risk of workplace litigation and understand that even the best employers have to deal with tribunals. As such, Management Liability insurance is now commonly purchased to protect both the company entity and individual directors from having to foot the bill.
Those that do not currently purchase Management Liability insurance, may want to put this at the top of their agenda very soon. We have already seen some insurers withdrawing from underwriting this line of cover, and premium rates for those that still do are increasing significantly. But the alternative is to have no cover at all, and that could prove to be far more costly.
If you have any questions about Management Liability insurance or you'd like to know more about what it means to you, please get in touch with us here and we'd be happy to help.
How important is Management Liability Insurance in 2020?