Employment tribunal fee regime is unlawful: what now?

The Supreme Court has ruled today that the employment tribunal fee regime is unlawful.

In July 2013, the government introduced fees for tribunal claims, leading to a dramatic fall in the number of claims.

Unison, backed by the Equality and Human Rights Commission, challenged the fees, arguing that they prevented access to justice and were discriminatory.

In summary - five practical points

1. The Supreme Court has ruled that the current employment tribunal fee regime is unlawful in terms of both domestic and EU law.
2. The Justice minister is reported to have said that the government will stop taking fees immediately. Although the Court's decision was in an English case, the practical impact will extend to Scotland.
3. The government previously undertook that all fees would be repaid to individuals if the fee system was found to be unlawful. Reports suggest that it will now have to repay up to £32m. It is unclear how this process will be managed, particularly in cases in which employers reimbursed these fees to claimants via a settlement or tribunal order.
4. The Court's decision doesn't mean that any fee regime will be unlawful; just the fee rates and structure actually implemented. A replacement scheme is therefore possible. Having had its fingers burnt, however,the UK government will no doubt proceed with caution. If it wants to introduce a replacement scheme, it will need to think carefully about the structure of this and level of fees, so as not to fall foul of the Supreme Court's decision. With power to manage tribunals due to transfer to the Scottish government (which previously indicated its intention to remove tribunal fees)the approach could differ between Scotland and the rest of the UK.
5. Will individuals, whose claims are time-barred, be allowed to submit late claims if they can show that they didn't bring their claims in time because of the fees? Doubtless, some will make this argument. As to its prospects of success, that is a blog for another day.

For more on the decision, and potential new fee regime, read on....

How much were tribunal fees?

Claimants had to pay an issue fee to bring a claim, and a hearing fee before any final hearing. The amount depended on the type of claim. For individual claims:

• Type A claims, such as those for holiday or statutory redundancy pay, had an issue fee of £160 and hearing fee of £230.
• Type B claims, including unfair dismissal or discrimination, had an issue fee of £250 and hearing fee of £950.

If a claimant considered they were unable to pay, they could apply for a waiver or reduction via a 'Help with Fees' system.

What impact did fees have on tribunal claims?

The number of employment tribunal claims was over 100,000 less in the year leading up to March 2017 than in the last full year before fees were introduced - our recent blog provides more information.

Supreme Court decision

Here are the key findings and comments:

Affordability of fees

The government's position was that whilst fees had discouraged claims, there was no conclusive evidence that they had prevented them. It argued that individuals on low or middle incomes could reduce 'non-essential spending' (which would include spending on clothing, personal goods and social participation) to pay tribunal fees.

However, the Court held that individuals must be able to reasonably afford fees. Fees are not affordable, and therefore not lawful, if low to middle income households can only afford them by sacrificing ordinary and reasonable expenditure for substantial periods of time.

The fall in claims was so sharp, substantial and sustained that a significant number of people must have found the fees unaffordable.

Fees make it futile or irrational to bring a claim

There was a greater fall in the number of lower value claims, such as those for unpaid wages or holidays, and lower value discrimination claims.

The Court stressed that there is an access to justice issue if the level of fees render it futile or irrational to bring a claim. It found that fees were so high that they prevented even those who could afford them from pursuing claims for small amounts, or claims that don't attract compensation even if successful.

By way of example, if fees of £390 are needed to pursue a claim for £500, the Court considered that no sensible person would proceed unless they were virtually certain of success, and that the award would be paid and fees reimbursed by the employer. In reality, however:

• Success can rarely be guaranteed - the complexities of employment law can make it difficult to predict whether a claim will succeed, and this assessment can require legal expertise (with associated costs).
• Employers often don't comply with orders to pay compensation, or reimburse fees.
• Even if claims ultimately fail, many people have arguable claims which they are entitled to present to a court.

Individuals must be able to enforce their rights

For individuals who could not afford a claim, or for whom a claim would be futile or irrational, the regime rendered their employment rights meaningless.

Individuals need to know that they will be able to enforce their rights; and businesses need to know that if they fail to meet their obligations, there is likely to be a remedy against them.

Did fees transfer the cost of running tribunals to users (rather than taxpayers)?

The principal aim of fees was to transfer part of the cost burden of tribunals from taxpayers to users. The Court agreed that fees can be a justifiable way of making resources available for the justice system and so securing access to justice, however:

• Fees were only contributing around 13% of the cost (far less than the one third originally estimated by the government). This was principally due to the dramatic reduction in the number of claims.
• The government was unable to explain how the fee rates, or criteria for 'Help with Fees', were reached.
• Lower fees which intruded to a lesser extent on access to justice could have been just as effective i.e. reducing the level of fees could increase the number of claims, and therefore increase fee income for tribunals overall: "to obtain maximum revenue, it is necessary to identify the optimal price".
• In setting the fees, there was a failure to consider the public benefits of tribunals. They are of value to wider society, not just users. Without appropriate access to courts, "laws are liable to become a dead letter". Cases can establish important principles and resolve genuine uncertainty in the law, with benefits extending beyond the particular claimants.

Did fees deter weak claims?

The Court agreed with the government that measures to deter weak or vexatious claims can increase the efficiency of the justice system and overall access to justice.

However, the statistics showed that the proportion of successful claims was consistently lower after fees were introduced: so there was no basis for arguing that only stronger cases were being brought.

Did fees encourage earlier settlement?

It was hoped that fees would encourage earlier settlement. However, the proportion of cases settled through ACAS slightly decreased after fees were introduced, perhaps because some employers were delaying settlement negotiations to see if the claimant would pay the fee.

The Court stressed that resolution of cases by negotiated settlement or mediation can only work fairly if individuals have the back-up option of proceeding to a tribunal: otherwise, the party in the stronger bargaining position (usually the employer) will prevail.

Discrimination

As it had already declared the fee regime unlawful in its entirety, the Court did not have to reach a final conclusion on whether the fees were discriminatory, but it made useful comments.

Unison had not argued that the entire fee scheme was discriminatory, just the higher fee payable for Type B claims. The Court agreed that this constituted sex discrimination: a higher proportion of women brought Type B claims, and the higher fee was not a proportionate means of achieving the aims of transferring cost to users, encouraging settlement, and discouraging weak claims. In fact:

• Type B claims were not necessarily more costly for the tribunal service to run (than Type A claims).
• Tribunal revenue would have been maximised by charging the 'right price' - the drop in both Type A and B claims indicated that neither was priced correctly.
• Type B claimants with good cases were as likely to be deterred as those with bad cases.
• Fees may discourage the respondent from settling.

Will there be a revised fee regime? Could this be different in Scotland?

It can be lawful to charge court or tribunal fees; it was the level of fees and the structure of the actual fee regime that was unlawful.

It is therefore possible that the UK government will introduce a new fee regime. Having had its fingers burnt, however,it will no doubt proceed with caution. If it wants to introduce a replacement scheme, it will need to think carefully about the structure of this. The level of any fees would also need to be set at a lower level so as not to fall foul of the Supreme Court's decision. Any new scheme could also include a fee payable by employers, when lodging their response.

However, the position could be different in Scotland. Power over the management of employment tribunals is due to transfer to Scotland in the near future, and the Scottish government previously indicated its intention to abolish tribunal fees. As such, the Scottish government might well adopt a different approach to tribunal fees than the rest of the UK, perhaps with a different structure or rates, or indeed (perhaps more likely)by opting to retain fee-free access to employment tribunals.

Watch this space.