Retail Sector Special: The legal environment

Helen Grimberg considers the emerging risk consequences for retailers of a changing legal and commercial reality

April 1st 2013 will see the implementation of a raft of significant reforms to the way litigation can be funded. These reforms will have real consequences for businesses, and are likely to reduce the number of employer’s liability and public liability claims that they face. Together with the growing online share of the retail market, retailers face a rapidly changing risk profile.

Abolition of recoverable After the Event insurance premiums and success fees

The most significant change for retailers, affecting the number of claims they face, will be the abolition of the recoverability of After the Event (ATE) insurance premiums and success fees (no-win, no-fee claims). This means that claimants who accept success fee agreements with solicitors will have to pay those fees out of any damages that they win. This would be a change from the current status quo, whereby losing defendants have to pay the claimant solicitor’s success fee bonus, on top of their standard costs. Further good news for retailers is that claims for personal injury (as will be the case in most claims faced by retailers) will see lawyers’ success fees limited to 25% of the claimant’s damages for pain, suffering and loss of amenity and pecuniary loss.

This reform should make it less lucrative for claimant solicitors to bring claims. On the other hand, this will be countered by limited measures which will give claimants extra resources with which to fund their litigation, and a new rule which makes it unlikely that successful defendants will be able to recover their costs from unsuccessful claimants. Nevertheless, the cumulative result of these reforms is that the volume of claims is likely to fall.

These funding reforms will not come into effect until 1 April, so retailers may expect to see a slight peak in the numbers of claims leading up to that date, as claimant lawyers try to get claims in before the deadline.

Impact of store closures and the changing commercial environment

Together with the funding reforms above, retailers may expect the reduction in traditional high-street floor space (HMV, Jessops and Blockbusters being three notable examples) to result in a corresponding fall in the number of claims they face. It is true that such closures, together with the growth in online shopping, is likely to lead to a fall in the number of public liability claims. It is also, however, likely to lead to an increase in the number of employers liability claims.

We work all day, we work all night

As retail activity moves from the high street to the warehouse, employees will face greater risks from machinery, falls and employment related stress.

Forklift turnovers, crushings and injuries resulting from loads falling off lorries are a common cause of injury in warehouses. During busy periods, the UK sees over 40 forklift injuries per week.

Working at height is another dangerous feature of warehouse work that is not commonly present on the high street. Guardrails, warning lines, adequate stepladders and safety nets can reduce the risks of fall-injuries, but there is no silver bullet. Manual handling injuries from repetitive lifting, bending and reaching, due to the bulk-storage nature of goods in warehouses, are also likely to be higher.

Defective or damaged equipment, which may receive less attention in a warehouse setting than a high-street one, can lead to increased injuries. Even a slightly increased inattention to spills can lead to increased slips and trips.

A world online

Increased online shopping will lead to an increase in transportation incidents. Whereas goods would previously have been transported to shop premises, they must now be delivered to the customer’s door. This means more deliveries, and more visits to unfamiliar premises for employees, and there is a corresponding increase in the risk of accidents.

Achtung Baby

With online shopping, much of the work done is out of sight, but it should not be out of mind. Employers will need to be extra vigilant in monitoring their treatment of employees, as untoward management can more easily go unseen. A prominent online retailer was recently stung by the accusation that thousands of workers in their warehouse in Germany had been abused by over-zealous security guards (employed on their behalf by a contractor), who were alleged to have neo-nazi links. Abusive or overly strict supervising staff in warehouses can in turn lead to personal injury claims for stress induced by bullying or harassment and, of course, to standard employment claims.

A changing environment

The retail environment is changing faster than perhaps ever before. It is impossible to know what the combined consequences of the litigation funding reforms and the rise of online shopping will be, but it looks as if there may be a reduction in the total number of public liability claims brought, together with an increase in the number of employer’s liability claims.

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