This article explores the employment related findings of the 2026 Litigation Risk Report and considers what they mean in practice for employers and HR professionals as we enter a period of significant change.

Published: 20 May 2026
Author: Phil Crowe & Rachel Taylor

Shoosmiths’ 2026 Litigation Risk Report provides valuable insight into how disputes are evolving, where organisations are most exposed, and which emerging themes HR teams should have on their radar. Drawing on the perspectives of more than 360 general counsel and senior in-house lawyers across the UK, the report highlights a rapidly shifting landscape shaped by legislative reform, data-driven disputes and the growing influence of artificial intelligence (AI).

This article explores the employment related findings of the 2026 report and considers what they mean in practice for employers and HR professionals as we enter a period of significant change.

Employment disputes: Trends and what lies ahead

The report notes a slight reduction in employment disputes compared with the previous year. However, this position is not expected to continue. With the implementation of the Employment Rights Act 2025 (the ERA), disputes are anticipated to increase significantly over the coming years. Historically, an expansion of workers’ rights has been accompanied by a corresponding rise in Employment Tribunal claims, and the ERA introduces a number of changes that are likely to materially increase employers’ litigation risk exposure.

One of the most significant changes will be the extension of the limitation period for most Employment Tribunal claims, from three months to six months, giving employees more time to reflect, seek advice and decide whether to pursue a claim. This change is expected to take effect on 1 October 2026.

Further significant changes which have been confirmed will take effect from 1 January 2027, include:

• a reduction in the qualifying period to bring an unfair dismissal claim
• the removal of the compensation cap for unfair dismissal.

Although unfair dismissal will not become a day-one right, these reforms represent a marked shift. Around 6.3 million employees currently fall within the six-month to two-year service bracket and currently have limited protection against unfair dismissal. From 2027, employees with just six months’ service will be able to bring unfair dismissal claims.

As a result, robust recruitment processes, effective probation management and early-stage performance management will become even more critical.

Data subject access requests as a litigation tool

The report highlights the growing use of data subject access requests (DSARs) in employment disputes. Employees are increasingly using DSARs to obtain material to support claims or to increase the cost and complexity of defending proceedings.

AI is also making it easier for individuals to generate lengthy and complex DSARs, significantly increasing the time and cost burden on organisations. As a result, disputes are becoming more resource-intensive, underlining the importance of having robust processes in place to meet statutory timescales and to make sure responses are compliant.

AI‑related employment disputes: the top litigation risk

AI-related litigation risk has emerged as the most significant concern for respondents to the report, overtaking both intellectual property and breach of contract claims. More than half of respondents to the report expect AI-related disputes to increase.

• AI‑generated employment claims: Claimants are already using AI tools to draft Employment Tribunal claims, correspondence and even witness statements. While these documents are often lengthy and follow similar structures, they do not always clearly articulate the legal basis of the claim, making them time-consuming and costly for employers to assess and respond to
• restrictions on workplace AI use: The report reveals that 43% of respondents have introduced restrictions on AI use in the workplace, highlighting how prominent these risks have become. Clear policies, supported by targeted training, are essential to ensure employees understand not only what AI can be used for, but also its limitations and prohibited use
• discrimination risks from automated decision‑making: AI systems can unintentionally replicate or amplify bias, particularly where they are trained on biased datasets. Where automated tools disadvantage certain groups or produce inconsistent outcomes, employers may face claims under equality legislation. These risks are expected to increase over the next three years.

While AI can offer significant opportunities for efficiency and innovation, these benefits must be carefully balanced against the growing employment and litigation risks associated with its use.

Managing AI-related employment risk

Effective AI risk management starts with understanding how AI is being used across the organisation. Clear training, supported by practical AI policies is essential to ensure employees understand acceptable use and associated risks.

Regular auditing of AI outputs is also a critical risk‑mitigation tool, helping organisations identify emerging issues and unintended consequences at an early stage. Ongoing testing to detect and address potential bias remains an essential part of responsible AI use in the employment context.

From a data protection perspective, employers must ensure they have a lawful basis for processing personal data, understand how AI tools operate and are transparent about the use of AI in relevant workplace processes.

Managing litigation risk: practical steps from the report

The report identifies several ways organisations are seeking to reduce exposure.

One notable development is the restriction on WhatsApp for work-related communications. One in four organisations has taken this step, rising to 42% in the financial services sector. WhatsApp messages frequently feature in Employment Tribunal proceedings, and the lack of oversight can present a real risk. Whether this approach is workable will depend on sector and workforce structure. While alternatives like Microsoft Teams may suit employers in the financial services sector, WhatsApp messaging can be harder to replace in sectors such as retail or automotive.

Another key strategy is targeted training for managers. Line managers are often making day-to-day decisions that later come under legal scrutiny. Providing early and practical guidance can materially reduce the risk of disputes.

Organisations are also encouraged to:

• regularly review policies and procedures
• conduct litigation preparedness reviews to identify areas of exposure
• review AI governance and internal controls to ensure AI is used appropriately.

Conclusion

Our 2026 Litigation Risk Report makes clear that employment litigation risk is evolving rapidly. Employers that take early action by strengthening policies, upskilling managers, improving documentation and implementing clear AI governance will be better placed to navigate an increasingly complex litigation landscape.

You can download a copy of the report here: Litigation Risk Report 2026.