Mitigate Your Risks Through Insurance

Employment Claims = Headaches for SMEs

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In today's litigious society, it is virtually impossible to ignore the threat of a legal claim. Hiscox's SME Risk Barometer research study found that 70% of UK SMEs believe they are more likely to be subjected to a frivolous legal claim due to the rise of a 'no-win, no fee' legal culture.

We all remember high-profile discrimination cases such as Stephanie Villalba's £7 million sexual discrimination claim against Merrill Lynch, Peter Lewis' £5 million claim against HSBC for unfair dismissal on the grounds of being homosexual and more recently Nadia Eweida's claim against British Airways for not allowing her to wear a cross around her neck.

However, these are just the few that make the papers. There are cases heard in employment tribunals every day. Figures from the equality think tank, c2e, showed that there was a 41% increase in claims filed with employment tribunals year-on-year in 2006. Unfair dismissal; sexual, religious, disability and age discrimination; sexual harassment; bullying; stress and low pay are all legitimate reasons to sue an employer. In fact, high-profile coverage of successful claims has made employees who have been subjected to discrimination more aware and more willing to pursue a claim, and the flurry of new employment legislation has led to predictions of increased discrimination claims being brought against companies in the next two years .

More recently, the age discrimination laws, enforced in October 2006, have been the cause of major concern for SMEs. A survey from the Federation of Small Businesses showed a 664% increase in calls to their free legal helpline regarding concerns over age discrimination in the past year.

It is not for me to comment on the rights or wrongs of public policy and the law, as I am neither a politician nor a lawyer. But what I can say with reasonable certainty is that having the right insurance could be a life-saver for your business in case of a legal dispute.

One must remember that the best form of medicine is prevention, not cure. All companies, large or small, should comply with current and forthcoming employment legislation and implement ethical employment policies, as well as ensuring that they have sound corporate governance and transparency. Insurance is not a contingency plan but rather a safety net. It is a vital tool in a business's risk management plan and it could save your reputation and your business. The bottom line is that a dispute will not only affect a business financially, but it could also significantly damage its reputation. Not all businesses can afford to bounce back from such a financial blow - can yours?

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