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Employment Tribunal Fees: the Fight for Justice

About The Author

Sophie Cole-Hamilton (Writer)

Sophie is a second year law student at the University of Birmingham. Sophie aspires to qualifying as a solicitor, with an interest in all areas of private law. Outside of her studies, Sophie is part of the Birmingham Law School pro bono group and has a passion for writing.

When The Employment Tribunals and the Employment Appeal Tribunal Fees Order came into effect in July 2013, there was an understandable backlash from employees and trade unions. The new legislation attempts to limit the amount of employment tribunal claims by introducing expensive fees and providing a scheme allowing the opportunity for parties to settle instead of going to tribunal. While employers argue this will get rid of weaker claims, and therefore avoid lengthy disputes, those opposed to the legislation argue it restricts access to justice for the lower paid by introducing fees that many workers simply cannot afford.

What changes has the new legislation made and why did these changes need to be made?

As well as the aforementioned legislation, Sections 7 and 8 of The Enterprise and Regulatory Reform Act 2013 came into force April 2014. This statute has amended Section 18 of the Employment Tribunals Act 1996, which now states that employees complaining of workplace disputes must go through the process of Early Conciliation with their employer before they can go to tribunal. This process, whereby a conciliation officer encourages the employer and employee to reconcile instead of going to tribunal, is conducted by the Advisory Conciliation and Arbitration Service (ACAS). ACAS, a government-funded department, deals with employment disputes; originally ACAS would only have stepped in when tribunal proceedings began. Before the new legislation was implemented, ACAS’s role was to provide a neutral mediation service to employers and employees who requested it, rather than the service being an imperative. ACAS are also responsible for running training workshops for employers and a helpline for disgruntled employers and employees.

Under Schedule 1 and 2 of The Employment Tribunals and the Employment Appeal Tribunal Fees Order 2013, complainants must now pay an issue fee and a hearing fee. The Order states that an issue fee is payable ‘when a claim form is presented to an employment tribunal’, whereas a hearing fee is payable on a specified date after the final hearing has been listed but prior to the beginning of the final hearing. The costs of these new fees vary significantly depending on the type of claim brought. For example, larger claims, such as employee discrimination claims, will attract higher fees than a claim regarding an employee being underpaid.

In order to distinguish between more and less serious claims, the fees have been divided into two groups: Type A and Type B. Type A claims tend to be smaller proceedings and include unlawful deductions from pay, unpaid notice, unpaid holiday or redundancy pay and many other types of smaller claims. Where a claim falls under the Type A category, the issue fee is £160, whilst the hearing fee will cost £230.

On the other hand, Type B claims tend to focus on more serious employment disputes such as unfair dismissal, discrimination claims and whistleblowing. Type B claims are considerably more expensive than their less serious counterpart; an issue fee costs £250, whilst the hearing fee will cost £950. Of course, counterclaims and appeals will cause further expenditure to claimants, and the fees alone may be out of some claimants’ budgets.

Furthermore, where more than one claimant is bringing the same claim, the fee structure will take into consideration the number of claimants involved. Where there are between two and 10 claimants, the issue and hearing fees will be the fees for single claims multiplied by two. Where there are between 11 and 200 claimants, the fees will be the single claim fees multiplied by four. Where there are 201 or more claimants, the fees will be the single claim fees multiplied by six.

However, not all of these fees are always payable. The government has shown some mercy to claimants by introducing the remission system contained within the Courts and Tribunals Fee Remissions Order 2013 for those suffering financial hardship. This allows some claimants full or partial exemption from fees depending on their circumstances. This system, however, does not seem to be working effectively; it was said in the House of Commons that only 24% of those claimants who had applied for remission from tribunal fees between July and December 2013 had been successful in their applications

It does not help that the remission system was made stricter before the Order was passed, in October last year. A capital test now ensures that if a claimant or their partner has more than £3,000 in savings, they are ineligible for remission, regardless of individual circumstances. This therefore ignores any other important expenses a potential litigant may have, for example whether they have a family to provide for. These capital limits will also include any redundancy payment the claimant receives.

Fergal Dowling, head of employment at Irwin Mitchell’s Birmingham office, argues the process of registering a claim, and a tribunal hearing, is already seen by claimants as being complex and time-consuming. Therefore the hassle of applying for remission on top of this may put potential litigants off registering a claim altogether.

As a result of the fees imposed on employees, the number of employment tribunals has fallen by 59% since the introduction of the new legislation.  Last month it was reported by the Ministry of Justice that only 5,619 cases were heard between January and March 2014, a stark contrast to the 13,739 cases heard in the 2013 period, prior to the new legislation being implemented. This severe drop in claims can been seen within both Type A and Type B claims; unpaid wages claims (Type A) fell by a huge 85%, whilst sex discrimination claims fell by 80%, and unfair dismissal claims fell by 62% (both Type B claims).

Trade unions have argued that the dramatic 59% decrease in single claims shows many employees have been put off taking their employers to court as a direct result of the fees. Frances OGrady, the general secretary of Trades Union Congress (TUC) has said that it is understandable that when an employee is wronged, they want to seek some redress from their employer through a tribunal. She argues that the fact that this is now too expensive for many workers is simply wrong.

Similarly, prior to Unisons judicial review of the fees last October, which will be discussed later in this article, the general secretary of the union, Dave Prentis, argued that the introduction of fees allowed unscrupulous employers to take advantage of basic workers’ rights and were therefore unfair to employees. He stated that Unison, the largest public sector union in the UK, felt the fees should be dropped.

Advantaging businesses, disadvantaging employees?

When the 2013 Order was introduced, Shailesh Vara, the Parliamentary Under-Secretary of State for Justice, argued the changes to employment tribunals were:

[I]n everyone’s interests, to avoid drawn out disputes which emotionally damage workers and financially damage businesses. That is why we are encouraging quicker, simpler and cheaper alternatives like mediation and arbitration. It is not fair for the taxpayer to foot the entire £74 million bill for people to escalate workplace disputes to a tribunal.

Although it is arguable from Shailesh Vara’s point of view that these fees needed to be introduced, even the Federation of Small Businesses (FSB) has expressed concern at their severity. In 2012, when the government began to debate major changes to employment law, the FSB suggested that while fees should indeed exist to avoid an imbalance of costs to employers (they estimate that the average cost of a tribunal to an employer is £6,900) the cost of tribunals to claimants should be lowered to prevent further disproportion. The FSB advocated for a “two tier” system to be introduced, whereby the claimant pays a small amount to complete the first stage of the process, and then another fee when their case is heard. The government, of course, has now implemented this by introducing issue and hearing fees. However, the FSB argued that the current fees payable by employees should be lowered, and should only be made higher when a complainant believes their case is worth over £30,000.

Employers similarly have to pay fees; if an employer and a claimant agree to mediation, before or instead of a tribunal, a fee of £600 is payable. This has been lowered from £750, the original amount proposed during a 2011 consultation. Likewise, if a claimant wins their case against the employer, the judge will usually order the employer to reimburse the claimant for at least some of their costs. This has been a result of Unison protesting against the fees’ severity prior to the new legislation being passed. However, many of the other fees payable by employers are infrequently needed and are considerably lower than fees payable by claimants. For example, fees for employers range from £60 for dismissal of a following settlement, to £350 for the court to reconsider its decision in a Type B claim. These fees are then likely to be scarcely paid, as they cover fewer circumstances. It is therefore arguable that employers are still in a superior position in contrast with employees.

Unison’s judicial review case

In October 2013, the High Court heard Unison’s legal challenge against the new employment tribunal fees. Unison challenged the government’s decisions on four submitted grounds in R (on application of Unison) v Lord Chancellor:

  1. The requirement that workers must pay fees violated the principle of effectiveness. Under EU law, “the principle of effectiveness” is where domestic procedural law, i.e. The Employment Tribunals and the Employment Appeal Tribunal Fees Order 2013, results in it being “virtually impossible or excessively difficult” for rights to be exercised. In this instance, we are of course talking about the rights of workers.
  2. The fees violated the principle of equivalence. In this instance, this means that the provisions contained in the The Employment Tribunals and the Employment Appeal Tribunal Fees Order 2013 (a form of domestic procedural law) must operate in the same way as other rights derived from domestic procedural law and their EU law equivalents. It was submitted that the principle of equivalence had been breached, as the fees were unequal to other court and tribunal fees implemented in other areas of the law.
  3. By passing this Order, the Lord Chancellor had acted in breach of the Public Sector Equality Duty, and therefore in breach of the principle of equivalence. The Public Sector Equality Duty is a general equality duty contained in section 149 of the Equality Act 2010, which states 3 main aims. These are to (i) eliminate unlawful discrimination, harassment and victimisation,(ii) to advance equality of opportunity between people who share a protected characteristic and those who do not, and (iii) to foster good relations between those with a protected characteristic and those without.
  4. The Employment Tribunals and the Employment Appeal Tribunal Fees Order was indirectly discriminatory and unlawful.

In his comprehensive judgment, Moses LJ concluded that the new fees scheme did not violate the EU effectiveness principle. His lordship agreed that although there were problems with the fees, using the phrase “excessively difficult” suggests the principle of effectiveness is not violated. His lordship held that even when the imposition of fees causes difficulty and renders the prospect of launching court proceedings daunting, “difficulty” is not enough to render the fees ineffective. Moses LJ stated that this part of his judgment applies unless the fees are so high that the prospective claimant is clearly unable to pay them, a situation which may be resolved if claimants are able to obtain a fee waiver through the remission system. His lordship therefore stated that he was unpersuaded that the principle of effectiveness had been breached.

Moses LJ further decided the principle of equivalence was not breached by the 2013 Order. He compared tribunal fees to the fees imposed in the County Court, where he concluded there was ‘a real disincentive to claimants of limited means to launch proceedings, compared with Employment Tribunals’. Moses LJ acknowledged that the legislation had been made slightly fairer, thus reducing the strain on claimants, which adds greater weight to his Lordship’s judgment. Moses LJ stated that the legislation had been made fairer to employees by the Lord Chancellor’s agreement with Unison regarding reimbursement of fees for successful complainants, as well as ACAS’s free early conciliation service.

Furthermore, it was said that the effort devoted to arguing about Public Sector Duty could ‘be devoted to consideration of the substantive grounds, rather than attacks on the procedure adopted prior to the introduction of the regime’. Moses LJ recognised that while there was a genuine fear that the Order may impede the Public Sector Duty, this fear may not have been well founded at that time. In essence, until the fees had been implemented for longer, the full effect of them could not be measured fully. His lordship commented that it was too early to tell whether the fees for Type B claims would fall more heavily on minority groups. Accordingly, it was impossible to conclude whether or not the higher fees could be objectively justified.

After considerable evaluation, Moses LJ dismissed Unison’s claim:

[T]he fundamental flaw in these proceedings is that they are premature, and that evidence at this stage lacks that robustness necessary to overturn the regime. We would underline the obvious: there is no rule that forbids the introduction of a fee regime.

Unison’s appeal: a fresh and successful challenge?

In May, Unison was granted permission to appeal the High Court’s decision, following the Ministry of Justice figures revealing the huge drop in tribunals. It is thought that this appeal may be more successful than the original High Court case. Now Unison is able to rely on the Ministry of Justice’s official figures, their legal challenge carries more merit and may well succeed.

Geoffrey Mead, a partner at Eversheds, argues that Unison may well see some success following their upcoming appeal, due to the pressure on the government following the sustained and significant drop in claims. Mead submits that this may mean that the government reduce the fees, or look at how the remission scheme operates and its effectiveness. However, Mead felt it was unlikely that the fees would be completely repealed, and it was therefore improbable that tribunal figures would ever reach the levels seen before the new legislation was implemented.

From Mead’s perspective it is foreseeable that the government may change the rules regarding tribunal fees following Unison’s appeal. Whether or not Unison’s appeal is successful, the high fees are causing many potential litigants to avoid bringing a claim, potentially letting “bad” employers off the hook. While it is positive to know that the government are keeping these fees and the remission system under review, more needs to be done to make sure that potential litigants with a worthy claim do not slip through the net and continue to lose out on their pay, their rights and ultimately, their justice.

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Tagged: Commercial Law, Employment Law, Justice

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