Problems you can see or expect are by no means the end of it. Trevor Clawson reveals some of the more worrying scenarios lurking beneath the surface and suggests solutions.

Did you hear the one about the chef whose food was so unpalatable that customers regularly complained? His employer sacked him on the spot. OK, so as punch lines go, it’s not even remotely funny.

But even less amusing is the fact that the chef in question promptly filed a claim for wrongful dismissal – a claim that might well have succeeded had the employer not agreed to settle out of court.

The filing cabinets of law firms and HR consultancies are bulging with similar cases. An employer dismisses or disciplines a member of staff for entirely legitimate
reasons but nonetheless ends up on the wrong end of a legal action that is near impossible to defend.

Often the problem is a failure to follow procedure. No one would blame a restaurant owner for sacking a chef who was unable to deliver quality meals, but if you don’t adhere to the proper processes, the one-time employee has been furnished with a gold-embossed invitation to seek legal redress.

And employment law is a labyrinth of unyielding legislation. In addition to legislation designed to protect workers from unfair dismissal, employers must also wrestle with rules and regulations that apply to discrimination – gender, sexual orientation, race, disability, religion and age – redundancy and the treatment of staff in the wake of a merger.

Additionally, it may not always be obvious that you’re in breach of the law. Guy Guinan, an employment partner at law firm Halliwells cites the discrimination laws as an example. “Direct discrimination is rare,” he says. “But companies may be guilty of indirect discrimination without knowing it.”

Guinan recalls the case of a Sri-Lankan teacher who applied for a post as a head of department at a school. The job description stipulated that knowledge of financial
management was required.

When she didn’t get the post, she claimed that the recruitment process was discriminatory because people from her ethnic background were unlikely to have the
financial skills specified.

“At first sight the job specification appeared to be entirely neutral,” says Guinan. “But the tribunal ruled that it did discriminate against certain ethnic groups and that the skills could have been learned on the job.”

Even careless words can cost money. “Asking a woman about her family at a job interview could lay you open to a charge of discrimination,” says David Smellie, head of law firm Farrer & Co’s employment practice. “As could saying something such as ‘I can’t believe you want to come back here now you’ve got a child’ to a female member of staff returning from maternity leave.”

The moral – be aware of your responsibilities under the law. Because if you’re not, at least some members of your workforce certainly will be. “Employees today tend to be very aware of their rights,” says Helen Morley, head of employment at Manchester-based law firm, Nexus. “In many cases, they are more aware than the employers.”

If you do fall foul of the law, the financial consequences are potentially very significant indeed. Tribunals have the power to make basic awards of up to £8,000 in cases of wrongful dismissal, plus additional compensatory awards (based on loss of earnings) to a maximum of £55,000.

In cases of discrimination there is no ceiling on the amount payable. In practice, though, the sums tend to be much lower. The average wrongful dismissal payout was just over £3,000 in 2004, with average penalties for sex and race discrimination coming in at £5,425 and £8,410 respectively.

Even so, it’s money you would rather not spend and even if you win the case there are the legal fees to consider. “We had one case that went to a tribunal,” recalls Gill Baum, office manager at network services company, The Internet Group.

“We won, but the legal fees really stung. It was at that point that the company decided to do something about its HR procedures.” Click here to read the rest of this four-page feature.