The demise (for now) of Employment Tribunal Fees

Following our previous article discussing the implications of the Supreme Court’s ruling that Employment Tribunal fees are unlawful, here is a more detailed look at the Court’s historic reasoning.

Background

Employment Tribunal fees were introduced in 2013 by the then coalition government, with two levels of fee depending on the specific claim: Band A and Band B. The total fee for a Band A claim (including the issue and hearing fee) was £390, whereas for a Band B claim the total fee was £1,200. The rationale behind the introduction of fees was three-fold: to pass some of the cost of the Tribunal system to those who use it, to reduce the number of claims being issued with no prospects of success, and thirdly to encourage early settlement, before the hearing fee has to be paid.

The Supreme Court’s judgment in R (on the application of UNISON) v Lord Chancellor has put the hammer down on that rationale, using a combination of data, surveys, economic and legal reasoning. That the Government, at the time of introduction of the fees regime and almost every month thereafter, were forewarned by employment lawyers that the regime was fatally flawed but chose to ignore those warnings is a matter of extreme embarrassment for them. Ultimately, they have succeeded in wasting a fortune of taxpayer’s money and will do well to learn lessons from this debacle.

Access to justice

Employment Tribunal fees undoubtedly reduced the amount of Tribunal claims being brought, by as much as 70%. Furthermore, it was not just the claims that had no chance of success that have fallen. If that had been the case you would have expected a rise in the percentage of successful claims, when in fact the opposite has happened.

Therefore, it is clear that there has been some reduction in access to justice, and this formed a significant part of the Supreme Court’s reasoning. The judgment uses some examples of the “hypothetical claimant”, such as a single mum with one child earning £27,264 (gross) to show that, if such a person wanted to bring a claim, it would result in them having less income than the Joseph Rowntree Foundation say is “necessary to meet acceptable living standards”.

Regardless of the income of the potential claimant, the Supreme Court also reasoned that Tribunal fees may render it “futile or irrational to bring a claim”, if for example a Claimant is forced to pay £390 to pursue an unlawful deduction from wages claim of only £500 (the median amount claimed in claims of this type). In that scenario, where prospects of success can never be 100% and the potential gain is so small, it may be irrational to bring a claim.

Transfer of fees to Tribunal users

The Supreme Court concluded that the aim of transferring some of the cost of the Tribunal system to its users had been successful to an extent. However, the Supreme Court criticised the Lord Chancellor’s reasoning that higher fees will automatically result in higher revenues being generated, which leads to savings for the tax payer. The Supreme Court cited basic economic principles which say that lower prices can lead to higher revenues, depending on the product that is being sold.

Furthermore, the Supreme Court made clear that the importance of Tribunal claims extended further than to just that specific claimant and respondent. Indeed, the Supreme Court pointed out that the Lord Chancellor was seeking to rely on many cases which were the result of Employment Tribunal litigation, thereby clearly providing a public benefit.

The effect of the threat of a claim was also a relevant public benefit: “People and businesses need to know, on the one hand, that they will be able to enforce their rights if they have to do so, and, on the other hand, that if they fail to meet their obligations, there is likely to be a remedy against them.”

Conclusion

The Supreme Court was very conclusive in its determination that Employment Tribunal fees were unlawful, and very little of the 42 page judgment was given over to any positives that could be taken from the fee regime. It will now be interesting to see whether the future holds a system of no fees, or whether the Supreme Court’s point on the economics of Tribunal fees leads to a lower level of fee being introduced. The problem for the Government is that their steadfast refusal to listen to all of the counsel they were receiving in 2013 and thereafter - evidenced further by the force which they contested this legal action (but ultimately lost) - is going to be source of much amusement to their political opponents. For them to receive Parliamentary support for any new system at all they are going to need support from political parties that have actively campaigned for the abolition of Tribunal fees, so that would seem unlikely. Their best and perhaps only hope would be in garnishing the support of the DUP party pursuant to their confidence-and-supply agreement. That is problematic and would raise an extremely embarrassing dilemma for DUP MP’s, since in Northern Ireland Tribunal fees were not introduced, with their government (including the DUP) long since taking the view that they were abhorrent.

Our view is as it has always been; by 2013 the Tribunal system did not change. The changes that were brought about were fatally flawed as, some four years later, the Supreme Court have agreed today. It is possible to have a Tribunal system that balances the rights of individuals to have access to justice with the right for employers to operate without undue cost poured upon them by unmeritorious claims. The solution was to improve the system; not to close the entrance door.