Recently, the Supreme Court ruled on a case brought by trade union Unison challenging the legal fees for taking claims to Employment Tribunals. The fees have been classed as unlawful and as of 26 July 2017, were scrapped.
What does this mean for the business owner?
The ruling will likely cause a government rethink regarding access to the Tribunal system, impacting on claimants and employers and approaches to HR/ employment law disputes. The decision will also likely prompt an increase in the number of claims made against employers.
In July 2013, the government introduced fees for making a claim in the Employment Tribunals. The intention of introducing fees was to reduce both the rising Tribunal operational costs and the number of false and misconceived claims made.
Following that announcement, the immediate effect was an increase in claims as everyone rushed to present their claims before the fees system began, followed by a huge (approximately 80%) drop in the number of claims made after the fees were implemented.
Unison lodged an application for judicial review against the introduction of fees. It had been made on the basis that the level of fees was too high, thereby obstructing access to justice. Unison also argued that the fees system indirectly discriminated against women as higher fees were payable in complex cases and could impact on claims of sex discrimination, equal pay and maternity being brought. The case was thrown out because there was not enough evidence to support their arguments at that time, however a further application eventually ended up being appealed to the Supreme Court. The Ministry of Justice had previously given an assurance that if the application was ultimately successful, all fees that had been paid up to that point would be refunded.
The Supreme Court held that under common law, the level of fees was unlawful and this did impede access to justice. In addition, the fee regime was indirectly discriminatory towards women and it was not a proportionate means of achieving a legitimate aim.
Statistics showed no improvement in the number of claims being successful so it seems that the intention of reducing or eliminating false claims had minimal effect. The fees system prevented people who had meritorious claims from pursuing them but those who were determined to make a claim, with or without merit, would continue to do so, regardless of the amount they had to pay.
The immediate effect of the Supreme Court's decision is that the Employment Tribunal fee system is unlawful and fees are no longer payable. Fees that have been paid since the introduction of the fee system will be refunded, at an estimated cost to the Government of £32 million.
Areas of concern
- Impact of early settlement
Currently, to bring an Employment Tribunal claim, a person has to have followed the prescribed ACAS Early Conciliation process, which anticipates to help both parties find middle ground without involving the court. Participation in conciliation is voluntary but in order to be able to pursue a claim in the Tribunals the claimant has to have an Early Conciliation Certificate number, which is issued when the conciliation is unsuccessful, or, if either party does not wish toparticipate in conciliation. Without that unique number, the Tribunal will reject the claim. Without the fees system in place, there may be less incentive to get matters settled before they reach the Tribunal stage. This could mean that the ACAS stage of the process will become less meaningful as many claimant parties choose not to participate or negotiate. Many claimants pursue claims on a matter of principle so a settlement at the ACAS stage may not be of interest - they want their day in court, so to speak, which no longer holds a fee as a deterrent.
- Strength of a claim
Under the fees system, some employers took the view that they would 'wait and see' if the claimant paid the fees and issued a claim. This would show that they were serious about their claim and it would give more information to enable the employer to fully assess the claim being pursued. Now a different approach might be taken.
- Fee refunds
- The question of the refund of fees is not as simple as it might first appear and at the moment we haven't got any information about what will happen in practice. Things to consider may be:
- Fees paid by another: The fee might not always have been paid by the claimant as their union or an insurance policy might have funded the claim. How easy will this be to refund?
- Fees already repaid under order: When Tribunal claims have been successful in the past, the tribunal would normally make an order for the fees to be paid by the employer to the claimant. As we don't know if the employer of their insurer will be entitled to receive the refund, the claimant could effectively get a double refund if it is paid back to them.
- Fees already repaid under settlement: The above also extends to the question of settlements. In some settlements, the fees and the compensation are separated so it's clear to see which is which. However, a settlement is often a global figure and doesn't give a breakdown. The claimant may say that the sum they received is just compensation and claim the fee refund but the employer may point out that they included the claim fee in the settlement - again, should the refund go to the employer or their insurer, rather than the claimant?
- Back claims
Another matter is the situation of those who feel that they had perfectly valid claims but had been deterred by the level of fees. Should they be allowed to issue a claim even though the case may be several years old? If there is a period of grace for this kind of claimant, how long will it be extended? Will the Tribunal system be able to cope with four years' worth of back claims in addition to current claims? What about the claims which were issued but were then struck out for non-payment of the hearing fee? This could all have an impact on claims procedures in the future.
What should businesses do now?
The full implications of the Supreme Court decision will take time to be fully understood. It is almost certain that the number of claims being issued will increase and more may progress to a Tribunal hearing. It's possible that the number of spurious cases might also increase, although the courts are fairly well practised at weeding these out.
Some insurers have speculated that the number of tribunal claims won't return to pre-2013 levels because of the requirement to use ACAS Conciliation services and because of the increase in the period of service required for unfair dismissals changing from one year to two. The government may also bring in further legislation that could either split the costs between employer and employee, or introduce a lower level of fees, thus attempting to deter spurious claims again.
The lack of clarity on this area will lead to an uncertain few months during which employers are encouraged to get themselves protected, should there be a sudden increase in the number of claims being made.
The unions and many claimant solicitors have already launched campaigns to promote the outcome of the case and encourage claimants to come forwards. The size and success of the campaigns is yet to be determined but heavy promotion in this area could see a significant increase in claims against employers.
Insurance protection is available via an Employment Practice Liability Policy which includes access to an expert legal advice service to support businesses. Please contact us for details.