Leading Stratford solicitors, Lodders, have issued a warning to local companies as new laws for staff claiming unfair dismissal come into effect on April 1

The changes mean staff will have the right to claim unfair dismissal after just one year's employment - instead of two - and the amounts that can be awarded will more than quadruple to a maximum of £50,000.

As a result, says Lodders commercial litigation partner Michael Wakeling, many companies which might in the past have settled out of court to avoid the 'nuisance value' of having to go to court, may now feel compelled to contest the cases.

Other changes being brought in on April 1 see the Industrial Tribunals being renamed Employment Tribunals. A form of mediation is also being set up, administered by ACAS (the Advisory, Conciliation and Arbitration Service) and with powers to adjudicate, in a bid to keep cases out of the courts and reduce the costs involved.

Mr Wakeling warns that the size of potential awards could put an immense burden on companies, particularly those with only a small number of staff.

He said:

"The changes are part of a wider set of civil law reforms with the laudable aim of reducing the costs of legal action, and making the processes quicker and more efficient.

"There are, of course, genuine instances of unfair dismissal and nobody condones that. However, previous award levels were so low, a maximum of £12,000, that it was often worth companies settling out of court rather than contesting the issues at stake, even if they felt the dismissal was fair.

"With the huge increases in potential awards companies may well need to contest the claims if they believe they were acting correctly. Small companies in particular could find the size of any awards crippling.

"There are well established procedures that companies must follow when disciplining staff and before dismissal. Companies faced with unfair dismissal cases will need to prove they made all the right moves prior to final dismissal or that circumstances dictated that dismissal was the only option. If they are in that position then, with the correct legal advice, there will be nothing to fear."