Earlier this year the UK’s employment tribunal system underwent some significant reforms. These reforms will have an impact on employers and directors who may become embroiled in employment disputes, especially where allegations of race, sex or age discrimination are made.
The reforms include the power for employment tribunals to impose a financial penalty for breaches of a worker’s rights involving the so far undefined “aggravating features”. Most notable though is the requirement that claimants will first have to register their complaints with the Advisory, Conciliation and Arbitration Service (ACAS). The purpose of this measure is to try and avoid claims reaching the litigation phase. So this means that claims will not be able to proceed before ACAS issues a certificate asserting that there is no reasonable possibility of settlement.
The changes to the system highlight the need for firms to make sure their Directors and Officers (D&O) and Employment Practices Liability (EPL) policies are fit for purpose. It is vital companies have the correct protection, which covers full costs and has an adequate limit of indemnity for the business.
Also, directors and risk managers must be aware that insurers may well regard a notification from ACAS as a “claim” for policy purposes. Many D&O and EPL policies contain provisions requiring insurers to notify claims “as soon as practicable”.
Firms would be well advised to follow the old adage “if in doubt, notify” as failure to do so may allow the insurer to deny the “claim”, despite the absence of any prejudice they may have suffered as a result of such “late notice”.