The Confederation of British Industry (CBI) has spoken of its concern about a rise in the number of tribunal claims made against employers.
Despite government reforms designed to resolve workplace disputes, the number of tribunal claims made against employers jumped by more than a third in the past year to return to 2003/4 levels.
A survey by the CBI revealed that less than one third of employers feel that the new system is effective and one in four would rather settle than go to a full tribunal.
"The process is so expensive and time-consuming that many firms, particularly smaller ones, prefer to settle out of court even after advice they are likely to win the cases," said CBI director of human resources policy, Susan Anderson.
"The likelihood of employers recovering their costs when they are successful is very low."
The CBI said that it was "disappointed" that the new regulations had been unable to reduce the number of tribunal cases and that the regulations were seen as damaging to employee relations.
The organisation said that it would be making recommendations later in the year to ensure that minor issues are not treated as "full-blown grievances".