Shake-up to stop 'bonkers' tribunals

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Mr Duncan said it was time the 40-year-old system was shaken up to give bosses more flexibility to hire and fire in line with their company's needs.

His call for urgent reform was sparked by the verdict of a tribunal this summer which force a London hair salon to pay £4,000 compensation to a Muslim woman who was refused a job because she wore a headscarf. The woman had been rejected for 25 hairdressing jobs.

In another case this month, a Scottish woman is taking action against Lothian and Borders Police because it refused her a Pc post on the grounds that she had poor eyesight. The woman is claiming discrimination on grounds of disability.

Businesses now feel that the tribunals are so heavily stacked against them that it makes it easy for employees with a grudge to use the system to extract outof-court settlements.

The Confederation of British Industry has found that all firms with fewer than 50 staff now settle every claim despite legal advice that they would win almost half of the cases.

Among the plans being considered by the Tories are moves to impose a fee on any litigant who loses their case. At present there is no deterrent from a claimant lodging a complaint.

Other changes will be aimed at restoring employer confidence in the system by changing statutory dispute resolution procedures. The CBI wants to require all claimants to make clear in writing they are lodging a grievance before the situation can escalate to a tribunal.

Mr Duncan said he believed some small firms felt "intimidated" by the current system, adding: "Some of the recent employment tribunals have been bonkers."