Changes to Unfair Dismissals and Employment Tribunal Fees

In his speech to the Conservative party conference yesterday, George Osborne confirmed two widely predicted changes to employment laws.

Firstly, the current requirement for 1 year of service before an employee can bring a claim for unfair dismissal is to be increased to 2 years from 6 April 2012.  There will be no change to those claims which currently require no minimum term of employment, for example discrimination and whistleblowing.  The government believe that this will prevent several thousand employment tribunal claims each year and save businesses substantial amounts of time and cost.

Secondly, the government intends to introduce fees for claimants bringing a claim in the employment tribunal.  Further consultation is expected on when this will be introduced and how large the fees should be.  The expectation in the press appears to be £100-£250 initial fee to bring a claim, with a further sum of up to £1,000 once the case is listed for a hearing.  In large or complex cases this second fee could be larger still.  The tribunal system is currently free and the government believes that the introduction of a fee will prevent malicious or speculative claims and pass the cost from the taxpayer to those who use the system.

So, what impact can we expect to see from the proposed changes?

Firstly, let’s consider the increase in qualifying period for unfair dismissal to 2 years.  This always used to be the case, with a qualifying period of 2 years from 1985 to mid-1999.  One of the reasons that the time limit was reduced in 1999 was that a 2 year period was seen as discriminatory to women who often have shorter periods of service due to career breaks for family reasons.  This is still the case, so we may see a legal challenge to the rule change on equality grounds.  Even if this doesn’t happen however, we still don’t see a significant easing of the burden on small businesses.  For a start, the government predicts the number of tribunal claims will fall by 2,000 a year.  From a starting point of over 230,000, this is a fall of less than 1% – hardly a major impact.  Secondly, if employees are barred from bringing an unfair dismissal claim they will try much harder to find a claim which isn’t time-barred, such as discrimination or whistleblowing.  These are complex and time consuming claims to defend and much more is at stake due to the potentially unlimited compensation claims.  This can only be bad news for hard pressed small employers, so while the headline is positive, it conceals a minefield of unintended consequences.

Next, let’s consider the proposed fees for bringing tribunal claims.  Historically the employment tribunal (formerly industrial tribunal) system was designed to avoid the need for legal representation, keeping proceedings simple and costs to a minimum.  Since those early days of good intention however, employment laws have become more complex with increasing layers of domestic and European law and the volume of cases has increased year on year.  Legal representation is now almost a must even though employment judges go out of their way to help litigants in person who are unsure of the correct procedures and paperwork.  The employment tribunal system has remained free to the user all along, and if you ask anyone who attends regularly they will probably agree that it is creaking at the seams due to under-investment.

The proposals suggest a fee for bringing a tribunal claim and a further fee on listing of the hearing.  If the claimant is successful this fee would be refunded, and if unsuccessful it would be retained by the tribunal.  This would certainly help fund the tribunal, but would it reduce the volume of claims?  The answer is probably a yes, but by how much will be in the detail.  There will almost certainly be a form of means testing to help those in financial hardship – this is already the case with civil court claims.  How this means test will be calculated will be key – after all most people bringing a claim will probably have just lost their job and be short of money.

For those who aren’t eligible for help and have to a pay a fee there will be three consequences.  Firstly, there will be fewer speculative claims where the employee is just “trying it on” in the hope of a payment to go away and leave the employer alone.  Secondly, once a claim has been made, employees will be looking to recover the cost of the claim fee in any negotiation, driving up the cost of settlements.  Thirdly, there will be more cases settled before the employee has to pay the second listing fee and fewer who are keen to have their day in court.  The whole issue of what will happen to the fees if a claim is settled before reaching tribunal is currently unclear.  The majority of claims are settled with a pay off or compromise of some sort and the decision on whether the tribunal will keep these fees will affect how keen employees are to reach a settlement.  Finally, don’t be too surprised if some law firms start offering to pay the tribunal fees of clients whom they calculate have a good chance of success.

So, in conclusion there are interesting times ahead for employment lawyers and their clients.  If you have any questions you would like to ask of our expert team, please call on 01245 893400, email [email protected] or visit www.backhouse-solicitors.co.uk and go to the Contact Backhouse page.