Decide whether to settle or contest an employee’s claim

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To help you decide whether to settle or stand firm when an employee threatens to bring a claim, you need to assess that claim’s chances of success. To do this, you need to understand three things:

1. What exactly is being alleged

Sometimes, an employee won’t articulate their grievance very well. It’s entirely legitimate for you to ask them to explain what the perceived wrongdoing is and how they have suffered as a result.

2. What the law says about that type of allegation

Is (or was) the individual an employee, worker or independent contractor? Their rights will depend on their status.
If the individual was an employee and has been dismissed, were they with you long enough to claim unfair dismissal?
Could an element of the dismissal result in an automatically unfair dismissal – for example, if the person has made whistleblowing or health and safety complaint?
If the employee resigned and is claiming constructive dismissal, how serious was the breach they are complaining about? The legal test they have to pass is that they resigned because you fundamentally breached their contract, which is quite a high bar.
Is there an element of discrimination? Don’t just think about direct discrimination, which is fairly rare, and harassment. Think about indirect discrimination, victimisation and discrimination arising from a disability (which can arise in less obvious situations like when performance or conduct may have been affected by being neurodivergent or going through the menopause).
Is there a breach of contract claim? How much may that be worth?

3. What happened

To assess the threatened claim’s strength, you need to know exactly what happened. That may mean getting someone who’s not too close to the situation to carry out a thorough and impartial investigation.

What to do with this information

Where a claim’s merits are debatable or finely balanced, you can take a strong stance in the settlement negotiations and work to sow doubt in the employee’s mind. A wise employee will not want to risk significant costs pursuing a claim with uncertain prospects when they can walk away now with a reasonable sum in settlement.