Businesses throughout the Midlands are being warned they could face increased costs from unfair dismissal claims following Government-imposed “cuts for cuts’ sake”.

Adrian Barnes, head of employment at DBS Law, told company bosses at the Business Growth Show in Edgbaston that many of the Government’s announced changes to the tribunal system could lead to miscarriages of justice which will cost them time and money.

Mr Barnes says that far from reducing red tape and saving money for businesses, the changes are “cuts for cuts sake” and will only cause additional administrative problems as they attempt to adjust to the new regime.

He said: “The tribunal changes may, in the short term, save costs for the Ministry of Justice, but there are hidden costs and complications that businesses will need to understand. As always getting professional advice is the safest way to make sure that your business completely understands the full implications of the changes.”

Mr Barnes said a potential problem was a change from evidence being read out loud at the hearing by witnesses to evidence now being taken as read.

“In practice judges simply have to take the time to read through the statements before or during the case which will take just as much time.

“However, if statements are read in private, justice may not be seen to be done; whether or not this leads to more decisions being referred to the Employment Appeals Tribunal remains to be seen.

“Another issue for local businesses comes from the proposed charges to be levied on applicants in unfair dismissal cases.

“The £1,000 plus charge per claim is an attempt to deter unnecessary claims but employers who lose at tribunal will have to add this sum to the payout they make.

“The deterrent may quickly be diminished in any case as trade unions offer to pay the charge for their members and insurance companies may even offer to finance cases in return for a percentage of any damages.

“It could, in fact, end up deterring employers from defending a claim at tribunal, forcing them to make a settlement when they may have chosen not to.”

Meanwhile, Paula Whelan, employment law partner at Birmingham-based Shakespeares, said businsesses could “tentatively welcome” the shake-up to the system. “The proposals set out by the Business Secretary should go some way to help rebalance the unfair dismissals claims system, often perceived as being skewed in favour of the employee.”