Employment Litigation on the Rise: What ERA25 Means for Employers

The Employment Rights Act 2025 (ERA25) continues to affect how employers manage their workforce. While several changes have already come into force, further forthcoming reforms are likely to have a substantial impact on the Employment Tribunal system.

In Employment Rights Act 2025: Economic Analysis, published by the Department for Business and Trade, the Government estimated that reducing the qualifying period for unfair dismissal claims from two years to six months would bring approximately 6.3 million additional employees within the scope of unfair dismissal protection. The forecast was that this change will generate around 9,000 additional ACAS referrals each year, with approximately 3,000 of those progressing to Employment Tribunal claims (ET1 stage), of which only 570 would require judicial time.

The extension of Employment Tribunal time limits from three months to six months is also expected to increase claim volumes, with the Government forecasting a further 6,250 ACAS notifications annually, of which approximately 2,100 are expected to progress to Employment Tribunal claims (ET1 stage), with only 390 requiring judicial time.

Many practitioners consider these forecasts to be optimistic and anticipate that actual claim volumes will significantly exceed the Government’s estimates. This, when added to the already strained employment tribunal system, paints a worrying picture.

The Employment Tribunal statistics for January to March 2026 show that the open caseload for single claims – those brought by an individual employee against their employer – has already increased by 55% compared with the same period in the previous year without the above changes yet being in force. In some regions, two-hour preliminary hearings are being listed for 2027 or 2028, with final hearings being listed to take place from 2029 onwards. Such delays create significant challenges for both employers and employees.

What is the reason for this increase?

In our experience (and that of those we speak to), the growing use of AI is a contributing factor to increasing complexity in employment litigation. More complex claims, an increase in applications to join additional parties, AI-generated pleadings and correspondence, and significantly larger volumes of documentation requiring review are all things being commonly seen.

New AI based law firms, such as Grapple Law, are also coming onto the market, bringing representatives and tribunals a new set of problems to contend with. AI may be making certain things easier for claimants, but it is also frequently creating confusion with misleading suggestions and false guidance, making genuine claims harder to unpick and respond to, and driving costs up for employers.

A further challenge is the significant increase in interim relief applications, which again appears to be, at least in part, driven by the use of AI. Presidential Guidance published in June confirmed that the number of such applications has risen from approximately 20 per year to around 20 per month in recent times. As interim relief applications are deemed an emergency measure, other hearings are often postponed or delayed to accommodate them, which is only worsening the situation.

Employment litigation is certainly on the rise, and that trend appears set to continue. Tribunal reforms to help ease the system and improve case completion times are under discussion, but change is unlikely to be quick, and will certainly not be in place before January 2027. For the foreseeable future, employers are likely to face an under-resourced tribunal system, prolonged delays and increasing litigation costs.

What can employers do?

Usual measures such as following fair processes and having well drafted documents (contracts, handbooks etc) that are up to date with the current law and best practice remain key. Many employers are considering probationary period length and shortening these when possible and appropriate for new starters.

Employers can also start taking proactive steps to place themselves in the strongest possible position ahead of the unfair dismissal changes. Processes during probationary periods should be reviewed, ensuring that staff with management responsibilities are trained to identify and address performance concerns early. Taking these and other steps now will help employers minimise risk, manage disputes more effectively, and defend claims where litigation cannot be avoided.

If you would like advice on preparing your business for the forthcoming changes, and/or would help reviewing, preparing and/or helping you implement new policies tailored to these forthcoming reforms, please feel free to contact our Employment Team.