Supreme Court Rules Employment Tribunal Fees Unlawful

In a grand finale to the long running legal battle between Unison and the UK Government, the Supreme Court has today found in favour of Unison and ruled that Employment Tribunal fees are unlawful.

Background

Employment Tribunal fees were introduced on 29 July 2013 by the then coalition Government with the stated aims of:

  • reducing speculative and malicious claims against employers
  • transferring a proportion of the costs of the Tribunal system to its users
  • encouraging alternative dispute resolution methods rather than legal action
  • protecting access to justice

Tribunal fees were introduced by way of a Statutory Instrument rather than primary legislation, a decision which was attacked by critics as a “back door” method.

Claims were divided into simpler Type A claims (such as unpaid wages) and more complicated Type B claims (such as Unfair Dismissal and Discrimination).  The cost of taking these claims all the way to Tribunal was a sizeable £390 for Type A and £1,200 for Type B.  A fee remission scheme was introduced to exempt those on low incomes and certain state benefits, but in practice this was of limited use as the 3 month window to issue a claim meant that many people were still earning too much in the assessment period.

On 6 April 2014 the Government introduced mandatory ACAS Early Conciliation before a Tribunal claim could be issued, tying in with the aim of encouraging alternative types of dispute resolution.

The Impact of Fees

Employment Tribunal quarterly claim statistics showed an immediate and dramatic impact, with the Q4 2013 figures showing a 79% drop in the number of claims compared to the same period 12 months earlier.  In the longer term claims fell by an average of 70% prompting many to question whether legitimate claims were being priced out of existence.  Could this really be protecting access to justice as claimed?

The Legal Battle

Legal challenges to Tribunal fees were launched immediately, with both the trades union Unison and Fox & Co Solicitors in Scotland seeking injunctions to prevent their introduction.  These initial injunctions were thrown out and it was left to Unison to continue the 4 year battle through a judicial review application.  This was rejected by the High Court, firstly in February 2014 and then on a fresh application in December 2014.  The case went next to the Court of Appeal who rejected it in August 2015 and finally on to the Supreme Court in July 2017 where victory was achieved by Unison and fees deemed unlawful.

The Unison challenge to the fees legislation eventually boiled down to two key points:

  • Tribunal fees prevent access to justice, imposing unjustified limitations on our legal rights as EU citizens
  • Tribunal fees are indirectly discriminatory as the higher fees for Type B claims disproportionately affect women and minorities

While this fight was going on, both the Government and The House of Commons Justice Select Committee conducted their own reviews of Tribunal fees in 2015.  The Government review unsurprisingly found that fees had broadly met their objectives but proposed a widening of the fee remission scheme.

The Supreme Court Judgment Part 1 – Tribunal Fees ARE unlawful

In a very readable 42 page judgment which can be read here, Lord Reed gave a detailed background to Employment Tribunals, processes and fees and then went on to consider whether Tribunal Fees were unlawful.

One of the key points made in the judgment was that Employment Tribunal cases are important to society as a whole.  Many cases are about the enforcement of statutory rights rather than financial compensation for the individuals involved.  If fees prevent access to justice and enforcement of these rights then they must be unlawful.  It was also noted that rights granted by Parliament should not be reduced by a ministerial Statutory Instrument.

In considering the affordability of claims the judgment compared the cost of the Employment Tribunal with the Small Claims Court, noting that the Tribunal is more expensive for Type A claims less than £3,000 when the average claim for unlawful deduction from wages is only £500.  It also looked at some hypothetical examples of claimants and concluded that despite the fee remission scheme, poorer families would have to make unacceptable sacrifices in their daily expenditure to afford to bring those claims.

The court also made the point that it isn’t just affordability that can prevent access to justice, but that rendering a claim “futile or irrational” can achieve the same effect.  With a cost of £390 to bring a claim for £500 “no sensible person would bring the claim unless he can be virtually certain he will succeed” when “in practice, success can rarely be guaranteed”.

After reaching the conclusion that Tribunal Fees DO limit access to justice and are unlawful, the Supreme Court went on to look at rights conferred by EU law and concluded that the Fees Order imposes disproportionate limitations on the exercise of EU rights and is therefore unlawful under EU law.

The Supreme Court Judgment Part 2 – Tribunal Fees ARE discriminatory

In the second part of the judgment, Lady Hale considered whether Tribunal fees were discriminatory.  In an interesting opening paragraph she noted that because Part 1 of the judgment had already found fees unlawful, it wasn’t strictly necessary to find that they were also discriminatory.  However, in a warning shot across the bows of any potential replacement fee scheme she noted that “the Lord Chancellor will no doubt wish to avoid any potentially unlawful discrimination in any replacement Order”.

The analysis of whether the fees regime is discriminatory starts by noting Employment Tribunals are subject to the Equality Act 2010 which makes discrimination on the grounds of a number of protected characteristics unlawful.

Discrimination claims fall into the more expensive Type B band.  When comparing cheaper Type A claims and more expensive Type B claims, a higher proportion of Type B claims are brought by women and people with other protected characteristics meaning that the fees regime indirectly discriminates against these groups.

Some interesting statistics

You may remember that two of the reasons given by Government when fees were introduced were to:

  • reduce speculative and malicious claims against employers
  • encourage alternative dispute resolution methods rather than legal action

The Supreme Court looked at the Employment Tribunal statistics before and after fees were introduced and drew two conclusions:

  • the proportion of successful claims has been consistently lower and unsuccessful claims consistently higher – it’s therefore not true that only stronger cases are making it to Tribunal
  • the proportion of claims settled through ACAS has reduced slightly since fees were introduced (probably because employers are now delaying negotiations to see if employees are prepared/able to pay the issue fee) – it’s therefore not the case that ACAS dispute resolution has proved more effective

What happens now?

The Government responded immediately to the Supreme Court judgment with Justice Minister Dominic Raab saying “We respect the judgement and we are going to take it fully on board and we are going to comply with it”.  He gave a commitment that the Tribunals would stop charging fees immediately and that all fees taken since July 2013 (estimated at £32m) would be refunded.

Employment Tribunals who accept paper based claims delivered in person stopped taking payment immediately and it is expected that the online claim system which is responsible for the majority of claims will be updated shortly to remove the payment step.  Until this is done it still won’t be possible to issue a claim without making payment.

The short term rewriting of rules and system reprogramming will be relatively straightforward, but there are two big questions which will need to be answered.

  • What will replace the current fees system?
  • How will fees already paid be refunded?

On the first question, we expect that the Government would like to introduce a replacement fee scheme at some point.  This would need to address the points in the Supreme Court judgment, meaning that fees would have to be lower and structured to avoid discriminating against any particular groups.  It’s also fair to say that with Brexit underway and a wafer thin parliamentary majority the Government may decide that this is a problem to be addressed some way in the future.

On the second question, Employment Tribunals and law firms can expect some nasty headaches and plenty of paperwork as they try to return thousands of individual fees to those who paid them.  This will need a review of all cases since fees were introduced as some fees will have been paid by the claimants directly and some by solicitors on behalf of the claimants and then recharged.  To complicate matters, the fees for successful claims may have been ordered to be paid by the employers (which may or may not have happened).  One thing is clear and that is that it will take months or even years to return all the right fees to the right individuals.

The Backhouse Team

Tel:      01245 893400

Email:  [email protected]

Web:    www.backhouse-solicitors.co.uk