The Forum of Private Business is calling on the Government to protect small businesses against employees who make "vexatious claims" against them.
It believes greater flexibility is needed for smaller employers in order to free them to create jobs and drive economic growth without being burdened by the threat of tribunals.
Nearly all forum members (92%) think judges should be given greater powers to "strike out" weak cases, 86% want the deposit and costs limits for vexatious claims to be doubled, while 73% think the compensation sought through settlements should be more transparent.
Almost a third believe fines should be introduced for employers who do not comply with employment law, suggesting smaller employers are more fair-minded than many critics argue.
However, many small business owners surveyed are concerned that increasingly complex employment law could make it more difficult to resolve disputes early.
The Forum's chief executive Phil Orford explained: "There is often a misconception that businesses tend to ride roughshod over the rights of employees, but this is far from true for the majority of small businesses that rely on recruiting and retaining key staff in order to grow.
"Clearly, we need companies that do engage in this sort of behaviour to be dealt with, but there needs to be a better balance so that employment law protects smaller employers as well as workers.
"We are currently in a situation where employment legislation designed to benefit employees can be a real barrier to creating employment, and favours individual workers at the expense of the rest of the workforce, often even when those claims are vexatious.
"This has to change. We need a fairer system focusing on mediation and conciliation rather than paving the way for disputes to reach the tribunal stage, allowing firms to flourish, create employment and drive economic growth."
By Gemma Rowbotham
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