The encouragement to sue can come from a television advertisement, social media, a newspaper or simply a legal agent researching incidents on private and public property.
As a result, employers are vulnerable to claims that can cost thousands of pounds to administer (and much more to ignore) arising from employment disputes, legal defence, tax investigations, VAT disputes and more. Your legal costs can be insured at reasonable cost but if you think it could not happen to you, study these examples:
Following the unexpected resignation of our policyholder’s head housekeeper to take up alternative employment, our policyholder was surprised to be the subject of a claim for alleged Constructive Dismissal on the grounds of sexual harassment. The ex-employee alleged she had been subjected to sexual comments and advances from the hotel manager, which had made her situation intolerable.
Solicitors were appointed who, finding the ex-employee’s representative evasive on the details of the alleged incidents, undertook a considerable amount of investigative work to try to establish the dates of the alleged incidents and the names of witnesses. This was a highly complex claim with the ex-employee seeking £12,000 in compensation.
On the day of the Employment Tribunal, the case was settled before the hearing started, when the policyholder agreed to pay the ex-employee the sum of £2,000. This was considered to be an extremely satisfactory conclusion, particularly as there was every indication the case could have gone on for four to five days. Legal expenses insurers paid the costs involved, which amounted to £12,810.
Following the failure of their accounts manager to transfer accounting information to a computer, despite his assurances that the job was underway and deadlines would be met, a disciplinary hearing was held during which he was invited to resign and work one month’s notice or have his employment terminated. When the manager refused to resign, our policyholder terminated his employment and paid him only what he was due up to the day he left their employment. The ex-employee alleged Unfair Dismissal and applied to the Employment Tribunal. Legal expense insurers appointed solicitors to act on the policyholder’s behalf.
After a full day’s hearing, the claim for Unfair Dismissal was rejected. However, the Employment Tribunal did find that in fairness, the policyholder ought to have paid the ex-employee up until the end of the month. Therefore an award of £1,328.00 in compensation was made. Fortunately for the policyholder, the insurer paid both the solicitors’ costs of £4,206.86 and the £1,328.00 compensation award.
Tax protection and in-depth investigation
Following receipt of a policyholder’s year-end company accounts, HMRC decided to carry out an in-depth investigation. The reasons given for this were the erratic business performance judged by gross profit and the general level of directors’ remuneration. Although the policyholder’s own accountant was initially appointed because they had already carried out a lot of work and were familiar with the policyholder’s tax affairs, when matters did not seem to be progressing, the policyholder requested a change of accountant.
Legal expenses insurers appointed a panel accountant who could see immediately that the Inland Revenue’s position had become very entrenched during the three years the investigation had been running. They arranged several meetings with the policyholder and Inspector of Taxes and undertook a considerable amount of work analysing and preparing the policyholder’s statements.
Following this, the acting accountants were able to refute all of HMRC’s arguments, and eventually the case was settled on a minor technical adjustment. Legal expenses insurers paid the costs incurred by both accountants, plus those of the self-employed company director whose assistance had been instrumental in reducing costs, which totalled £12,721.
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