Businesses face potential surge in litigation claims

Organisations are bracing themselves for a spike in the numbers of contract disputes and employment-related proceedings after the end of the government’s furlough scheme later this year. According to insurance and risk management firm Gallagher, companies could see such action increase during 2021, with employment-related litigation and redundancy claims likely to rise when the furlough scheme ends on 30 September as employers are forced to make staffing cuts that they have so far deferred.

The Gallagher Business Litigation Index – a survey of 3,000 companies from across a variety of business sectors – found that more than 56% of firms have faced charges, claims, or allegations of illegal activity since 2016, a figure that is increasing each year. The majority of claims overall are against those in the IT and construction sectors.

Wrongful dismissal claims rose 17% over the five-year period, discrimination saw an increase of 17%, workplace harassment was up 13% and constructive dismissal by 10%. Gallagher’s research also found an increase in claims against organisations due to data leaks, with a threefold increase in such claims between 2016 and 2020.

Gary Fletcher, managing director south of Gallagher’s retail division, said: “Litigation is being fuelled in part by supply chains, COVID-19 and Brexit but in addition to this, economic downturns also usually produce a boom in disputes. 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.”

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