I do not propose to set out a complete explanation – but one factor is a mismatch between expectations and the reality. There is a survivor bias in the media whereby high-value payouts are widely reported, and the generality of cases – with more modest tribunal awards – do not warrant media interest.
There are free statistics published by the Ministry of Justice each year. These are picked up and disseminated via solicitors’ websites. Why doesn’t that help? Well, the summary statistics presented are also less useful than they should be. The statisticians’ report headlines with the highest value award and the mean award.
Those two figures sound worthy of attention. But let me illustrate the problem by showing the actual distribution of unfair dismissal awards in the employment tribunal (left-hand side) plotted alongside the distribution which one might assume, based on the summary statistics: the shapes are quite different.
If, as would be quite understandable among litigants aware of the usual range of awards, you assume normally-distributed awards around the reported mean, and your willingness to settle will be limited to offers that are, in most cases, well above the award’s true expected value.
Or if, as is also very common indeed, you were unaware of mean values, but had noticed reports of the outlier awards in excess of £150k, that will also lead to psychological anchoring around an unrealistic settlement figure.
Naturally, each case turns on its own facts. Some claims must belong to those outlier groups – and typically those relate to claims brought by highly-paid claimants whose compensatory or pension loss awards make up the bulk of the compensatory figure.
But for me the key message is that a lack of helpful statistical information and interpretation (such as might assist both parties to a dispute in avoiding legal costs) fosters needless litigation.