In July 2013, Employment Tribunal fees were introduced and Claimants would have to pay fees of up to £1,200 depending on the type of claim they were bringing. The rational for the introduction of the fee regime was to transfer the cost burden of Employment Tribunals to its users, deter unmeritous claims and encourage early settlements.

It was anticipated the fee regime would result in an 8% reduction in cases. However, statistics demonstrated a 66-70% reduction.

The Judgment

The Supreme Court decided the Employment Appeal Tribunals Fees Order 2013 (the Fees Order), which implemented the Government’s Employment Tribunal Fee Regime was unlawful and must be quashed.

In short, the Supreme Court found the Fees Order:

  1. had cut down statutory rights and should have been set at a level that everyone could have afforded, taking into account availability remission. The statistics in the substantial drop of claims, surveys and hypothetical examples led to a conclusion that many people have found the fees unaffordable and prevented access to justice. Those statutory rights had been granted by Parliament and could not be reduced by statutory instrument from a minister. Given the Fees Order prevents access to justice and the Government has acted in a way which went beyond the powers granted to it by Parliament;
  2. imposed unjustified limitations on the ability to enforce EU rights and was unlawful under EU law;
  3. was indirectly discriminatory to charge higher fees for type ‘B’ claims (which include discrimination claims) than type ‘A’ claims.

What happens now?

  1. Whether a new fee regime will be introduced is unclear. Given this was a flagship policy of the then coalition government, the Government may seek to introduce a new fees regime with fees at a lower level and one which takes into consideration Lady Hale’s comments on indirect discrimination. It may decide that cost-benefit is not worthwhile and decide to abolish fees in their entirety. With a Government and ministry of justice focused on more pressing matters, ahem Brexit, we may see the introduction of a new fee regime but on the backburner.
  2. As of the 26th July, Claimant’s do not have to pay Tribunal fees. The immediate consequences are considered below.
  3. The Supreme Court ruled the Fees Order was unlawful when it was made. As such, all fees paid between 2013 and now will have to be refunded by the Lord Chancellor’s Department.

3 key areas employers should consider

Human Resource departments should:

Examine any claims that have been made against your company since 2013.

If you were ordered to pay compensation to reimburse the Claimant’s Tribunal fees, then it is likely your company can recover this award. We wait for further guidance on how this will work in practice but employers should ensure that it has an accurate record of the sums it can expect to receive.

Anticipate disgruntled employees bringing Employment Tribunal action on a more regular basis.

As the statistics demonstrate, the fees have been a significant deterrent for employees bringing claims. This is particularly so in relation to lower value claims or claims where compensation cannot be obtained, for example, when obtaining a declaration that an employee is a permanent employee. Employees without legal representation, can have their dispute reviewed by a Judge at no cost and little risk. Accordingly, increased litigation is likely and the company’s budgets on legal expenses or HR support may need to be re-examined.

Modify your attitude to settlement discussions.

Remember, settlement discussions can take place at any time. It is predicted that that pre-action settlement resolutions through ACAS early conciliation may be more difficult to achieve. We expect to see successful resolution of disputes before a Tribunal proceedings are filed to decrease. Employees will be less discouraged to submit a claim in the Employment Tribunal. Indeed, it may be used as a tactic to put the employer under time limit pressures. Whilst this may appear to be a negative, it can have advantages. Often, it is not until the claim form is received that the basis of an employee’s complaint becomes clear.

If you see an increase in the number of claims you are receiving, you can explain to the board or management that this fundamental change may be a key reason why.