Employment Tribunal Fees – The Bigger Picture

In a pincer-judgment, delivered by two Justices including its new President Lady Hale, the Supreme Court concluded the Government’s arguments were wrong in law and had no basis in fact, and that women disproportionately and unlawfully paid a higher fee to bring claims.

Written by: Mark Emery, Employment Law Partner Photography by: Freeths Solicitors

The Government had argued fees were justified because they would:
• transfer the financial burden from taxpayers to employment tribunal service users;
• disincentivise weak/unmeritorious claims; and
• incentivise early settlements.

In dismissing the Government’s arguments, the Supreme Court accepted evidence showing individuals and families on average incomes were unable to afford fees without sacrificing necessary expenditure, even with a remission system. It concluded that potential claimants were put off submitting claims to the employment tribunal because of fees, such expenditure often being incurred on loss of work. The Supreme Court asked the question whether “the sacrifice of ordinary and reasonable expenditure can properly be the price” of access to justice. The Supreme Court decided that forcing potential claimants to make such sacrifices constituted an unlawful impediment to access to justice.

The Government conceded that fees had not acted as a disincentive for unmeritorious claims, because the proportion of successful claims decreased during the fees regime. The evidence is that fees disproportionately put off claimants with potentially meritorious claims.

There was also significant evidence that the fees regime was not incentivising early settlement – in fact the opposite was often the case because employers often ‘wait and see’ if the employee paid a fee instead of engaging in early settlement.
The Judgment goes further, attacking the Government for apparently not realising the importance of access to courts in maintaining ‘the rule of law’.

‘The importance of the rule of law is not always understood. Indications of a lack of understanding include the assumption that the administration of justice is merely a public service like any other… It may be helpful to begin by explaining briefly the importance of the rule of law, and the role of access to the courts in maintaining the rule of law…”

The Supreme Court analysed the law from the Magna Carta of 1215 onwards – a guarantee of individuals’ access to courts which administer justice promptly and fairly – and how this guarantee has been interpreted into the 21st century. It concluded that the Government’s argument – that there is no detriment to society by reduced access to employment tribunals – was “demonstrably untenable” as society benefits from access to justice, not least in courts defining and clarifying the obligations and rights of employers and employees.

In conclusion, the Supreme Court said the fees regime was so flawed it is ‘unlawful ab initio” – it is as if fees have never existed – meaning that all who have paid fees, including employers who have been ordered by the tribunal to pay the fee to a claimant, are entitled to a refund.

Short-term

The possibility of backdated claims from long-gone employees, who may argue they were prevented from bringing otherwise good claims because of fees. There will be a period of uncertainty as the appeal courts decide whether such arguments can succeed, but there is a significant prospect that such arguments may succeed in some cases. For example, a pregnant employee may argue she was forced to choose spending from her savings on her child or on an employment tribunal fee.

Employers who may have paid fees to employees can reclaim the fee from the Government, under a scheme yet to be introduced.

Medium term

The Government may consider a new fees regime. Given the terms of the Supreme Court Judgment this must be realistically affordable (i.e. set at a low level) and at one level. One option under consideration is for the employer to pay a fee to defend the claim, notwithstanding serious concerns raised by businesses.

Long term

This judgment restates what has been a principle in the UK law since the 12th Century: that access to courts is fundamental to the rule of law. With proper access to employment tribunals there is public benefit for employees being able to enforce their rights, and for employers to have clarity on these rights. The judgement recognises the fundamental economic inequality between employer and employee and that employment tribunals are a fair way of ensuring access to justice.

In fact, when in the employment tribunal, little has changed. Employers who act reasonably in their decision making, not tainted by discriminatory factors, will be able to successfully defend claims. The right to claim costs has increased in recent years, leading to significant costs awards against vexatious employees. While there may well be an increase in nuisance claims, robust procedures properly followed with appropriate advice will continue to minimise risk to employers.

If you are concerned about receiving a backdated claim from an ex-employee, we can provide a ET Claims Review Service, which is designed to review the termination of an employee’s contract and highlight any areas for concern. This service will give you peace of mind. For more information, please call me on 01865 781 079.