Supreme Court declares employment tribunal fees unlawful - what does it mean for employers?

27 July 2017

The Supreme Court has unanimously ruled that the introduction of tribunal fees in 2013 was unlawful and must be quashed on the basis the fees have the effect of preventing access to justice and are indirectly discriminatory. The result is that there will be no fees to be paid to file or pursue claims.

The Supreme Court accepted that the purposes behind the introduction of fees were potentially legitimate - transferring the cost burden to the 'users' of the tribunal system, incentivising earlier settlements, and discouraging weak or vexatious claims. However, the Lord Chancellor could not lawfully impose whatever fees he chose in order to achieve those purposes. In order for the fees to be lawful, they must be set at a level that everyone can realistically afford, taking into account the availability of full or partial remission. Equally, the fees must not render claims futile or irrational to be brought as some claims do not seek financial reward or (only modest amounts) but remain equally important, for example the right to rest breaks and statements of employment.

On the evidence produced, the Supreme Court concluded that the fees imposed are, in practice, unaffordable and far too high, preventing even people who can afford them from pursing claims for small amounts and non-monetary claims. As such they prevent access to justice and accordingly unlawful "ab initio", in other words from the outset. As for the aims of increasing settlements and decreasing weak claims, there was no evidence to support that the introduction of fees achieved such aims.

The Supreme Court also went on to state that the fees regime was indirectly discriminatory because the higher fees for Type B claims which include discrimination claims, put women at a particular disadvantage.

The immediate consequence this important judgment is that tribunal and EAT fees cease to be payable.

The introduction of fees in 2013- quick recap

Most employment rights can only be enforced in the employment tribunals. Prior to the introduction of the Employment Tribunals and Employment Appeal Tribunal Fees Order on 29 July 2013, a claimant could issue and pursue a claim without paying any fees.

The 2013 Fees Order requires an issue fee to be paid at the time the claim is lodged, with a further hearing fee paid prior to hearing. The amount depends on whether the claim is classed as Type A (total fees £390) or Type B (total fees £1,200) claim. Type A claims are specified and generally require little tribunal time. All other, and the vast majority of claims, are Type B and include unfair dismissal and discrimination claims.

Since the introduction of the fees regime there has been a sharp and dramatic fall in the number of tribunal claims of 66 - 70%.

What is the immediate impact of the Supreme Court's judgment?

As the Supreme Court ruled that the Fees Order was unlawful "ab initio", in other words from the outset, employment tribunals and the Employment Appeal Tribunal ceased to charge fees immediately on the date of the judgment, 26 July.

What about fees already paid?

Fees already paid are to be reimbursed in line with an undertaking given by the Lord Chancellor back in July 2013. Will claimants need to request reimbursement? What if they recovered the fees from the employer by way of a costs order or settlement agreement - in effect double recovery? It is unclear whether employers who had a cost order awarded against them in relation to fees paid by a claimant will be able to reclaim the fees. No doubt an administrative headache for the Ministry of Justice will follow.

Are fees gone forever?

While the current Fees Order has been held unlawful, this does not prevent the Government introducing a new order. However, any future fees imposed will need to be set at a level that everyone can afford and take into consideration the monetary value of the claim. This will be no easy task. As the Supreme Court points out, "the constitutional right of access to the courts is inherent in the rule of law".

Will this mean a sharp increase in the number of tribunal claims?

The 70% reduction in tribunal claims has been widely attributed to the introduction of fees - and they have certainly played a very significant part. But before planning for a deluge of claims, remember that the cap on unfair dismissal claims at one year's pay, together with the increase in the length of service requirement from one to two years, also contributed to the reduction in claims since 2013. Yes, the upfront payment of a fee has been a deterrent for many but for employees on average or below average earnings, the most they can recover for ordinary unfair dismissal is now 60% below the figure in 2013 and that has not changed. In addition, there is also the use of protected conversations and mandatory pre-claim conciliation. While an increase in the number of tribunal claims is likely, returning to pre-2013 levels does not necessarily follow.

Will tribunals allow late claims?

There are strict time limits within which a claim form (ET1) must be presented to the employment tribunal. For most claims, this is three months from the date of the act complained of (for example, the date of dismissal or the date of a discriminatory act). However, for many claims including unfair dismissal claims, the time limit can be extended where it was "not reasonably practicable" to present the claim in time. For discrimination claims, time can be extended where the tribunal considers it "just and equitable".

Will tribunals accept that it was "not reasonably practicable" to bring a claim in time or it is "just and equitable" to extend time where an employee/former employee claims they were prevented from doing so by the unlawful fees regime? No doubt, tribunals will be asked to consider such requests.

And finally

It's official, as the Supreme Court states in its judgment "employment law is characterised by a relatively high level of complexity and technicality", but then of course all those involved in employment law already knew that.

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