Legal disputes on the rise for UK businesses

Authored by Mike Wildy, Senior Business Developer, Allianz Legal Protection

Although no business wants them, legal disputes are extremely common for organisations in the UK. Threats and complaints more than doubled in the last two years, with the five-year picture even more damning. Over this period, more than half (56%) of all businesses have faced an accusation, claim or allegation of unlawful behaviour 

Within this blog post, I explore why legal disputes are on the rise, what businesses can expect in the future and ways to mitigate the risks.

Disputes come from all angles. However, according to research by risk management and insurance brokerage Gallagher, issues arising from employee-related incidents account for the vast majority of disputes (44%), with wrongful dismissal, discrimination, harassment in the workplace and constructive dismissal the most common.  This could be a direct result of individuals becoming more aware of their employment rights and the protection they are offered under the Equality Act 2010.

Clients and customers make up a further 45%. Coronavirus has highlighted this, with the pandemic leading to six in 10 businesses threatening or taking legal action against another business over the last year.  This was either as a result of an alleged contractual breach or because money was owed.

Themes of legal queries over the last 6 months?

As UK businesses navigate into a post-covid world, themes are becoming evident in the type of legal queries businesses have.

Employment law is a hot topic: The furlough scheme has been effective in keeping people in employment through a challenging 15 months, although in some cases it could be seen as delaying the inevitable. With the scheme set to end in September, businesses will need to make decisions which could ultimately lead to redundancies.

However, an added dimension to an already complex situation is that those who have been ‘on furlough’ for over a year could now have amassed two years’ service having worked very little and will now be better able to access the Employment Tribunal Service. Therefore, when Furlough ends in September, there is the potential for a large uptick in employment litigation.

The future – with Covid and Brexit

The continued effects of Brexit and Covid-19 could see litigation soar. Gallagher claim “the situation has created a perfect storm with 64% of organisations expecting business litigation to either remain at the same volume or increase this year.”

Cyber claims have been on a continuous uptrend for the last 5 years, but the coming year could see unrivalled growth. The pandemic has forced increased levels of remote working and a reliance on technology which is here to stay. But with that comes heightened cyber risks.

There will also be situations which are the first of their kind and have no precedent. One of many examples Allianz’s legal advice helpline, Lawphone has highlighted is the calls from employers who have individuals refusing to wear masks in the workplace, therefore seeking advice on whether this is enforceable.

Ways in which businesses can mitigate legal risks

Given the landscape, it is essential that businesses do what they can to mitigate legal risks.  There are many ways in which they could do this:

• Legal advice services: Most small businesses don’t have the in-house legal expertise to deal with today’s challenges. Therefore, a good legal advice service could help reduce the risk of legal action by giving guidance and ensuring procedures are followed.
• Increase business awareness: There is evidence that employees’ awareness of their rights have increased, with them accounting for 44% of all disputes.  Therefore, it is essential that employers’ knowledge evolves at the same rate to stop these figures increasing.
• Insure your business’s legal expenses: It could provide cover for legal representation and cover for legal expenses in the event of a claim.

If something does arise?

• Seek advice: It’s important that the your business seeks advice at the earliest opportunity from a trusted professional.
• Clarify current protection: Check to see what protection your insurance policies provide, perhaps in conjunction with your broker or preferred insurance professional.
• Alternative Dispute Resolution (ADR): There are ways of getting redress without going to court. Mediation is now recognised as one of the fastest and most cost effective methods of settling disputes. Going to trial often means long periods of costly litigation with no guarantee of an outcome which will satisfy either party.

If you would like to talk to Mike Wildy about the issues raised in this article CLICK HERE, leave a message and youTalk-insurance will pass yoru enquiry on