Employment Tribunal fees unlawful says Supreme Court

In a dramatic decision, the Supreme Court held that the Employment Tribunals and Employment Appeal Tribunal Fees Order 2013 is unlawful and…

In a dramatic decision today, the Supreme Court has held that the Employment Tribunals and Employment Appeal Tribunal Fees Order 2013 (which introduced the charging of fees into the employment tribunal system in July 2013) is unlawful and discriminatory.

This decision, which has caused shockwaves in the employment law and HR communities, is a bold and dramatic intervention by the courts into government policy. The impact is likely to be felt by all employers across the UK.

What happened?

This challenge to the employment tribunal fees regime, brought by the trade union UNISON, has now been running for over 4 years. On its long journey through the legal system, the case has been heard twice by the High Court and more recently, in August 2015, by the Court of Appeal. This Supreme Court hearing was the union’s final domestic avenue of appeal.

UNISON sought judicial review of the Lord Chancellor’s decision to introduce fees (via the Employment Tribunals and Employment Appeal Tribunal Fees Order 2013) arguing that the charging regime was a barrier to access to justice and made it disproportionately difficult for employees to enforce their employment rights.

The Supreme Court unanimously upheld this appeal, holding that the Fees Order is unlawful under both domestic and EU law as it has the effect of preventing access to justice. The Court pointed to the “substantial and sustained fall in claims” as proof of this.

The Supreme Court observed that many claimants in employment matters are seeking relatively small sums of money (for example unpaid wages) or non financial remedies (for example a claim for a written statement of particulars of employment). The Court was critical of the fact that ET and EAT fees bear no relation to the value of the claim and in effect render it “futile or irrational” for a claimant to pursue a claim that might be of huge personal importance but relatively low monetary value.

The Court took a very broad and pragmatic approach to the question of whether fees were, in fact affordable.  It stated that even if a claimant could in theory find funds to pay fees it was important to consider “the likely impact of fees on behaviour in the real world”. Claimants should not be expected to forgo an “acceptable standard of living” in order to bring a claim.

In the Court’s view, it did not matter that there was a chance that successful claimants might be able to recover fees from their employer. The Court emphasised that access to justice must be available to all claimants, not just those that win.

Importantly, the Supreme Court also found the Fees Order to be indirectly discriminatory, primarily because a greater proportion of women than men bring more expensive Type B claims (including claims of sex discrimination). The Court acknowledged the Lord Chancellor’s legitimate aims of transferring some of the costs of the tribunal system to its users and encouraging settlement of claims. However, it held that the high fees set for Type B claims (totalling £1200 to take a claim to a full hearing) was not a proportionate means of achieving this. The Court emphatically stated that “meritorious as well as unmeritorious claims might be deterred by the higher price”.

What does this mean for me?

Many of you will be very concerned that this decision will mean a return to high volumes of claims.

The Supreme Court ‘quashed’ the Fees Order, which effectively means that this piece of law is now invalid. The Justice Minister has said that the Government will cease taking fees for employment tribunals “immediately” and begin the process of reimbursing fees back to 2013. From today onwards, until further notice, it appears that access to the employment tribunal will be free of charge. It is therefore possible that you may see an immediate increase in claims. 

However, it is unlikely that fees are gone for good. The government will have to go ‘back to the drawing board’ to work out a less onerous or differently structured charging regime. The Supreme Court decision seems to envisage that a new system will be implemented in future, offering advice to the Lord Chancellor on how “to avoid any potentially unlawful discrimination in any replacement order”. 

Comment

While this decision will undoubtedly lead to an increase in claims, a re-think of how fees are set and structured is in many ways welcome and overdue. The very high level at which fees are set (specifically the £950 hearing fee for Type B claims) has never really been cogently explained or justified. Hopefully, any future charging regime will be more balanced and transparent.

Devising a new charging regime will take time and is likely to require a period of consultation first. This means that employers and employment lawyers face a difficult period of uncertainty between today’s strike down of the old charging regime and the implementation of any new one. As Parliament has now broken for the summer holiday it is unlikely that there will be any real movement on this before the autumn. Hopefully the President of the Employment Tribunals will shortly offer some advice on how this interval should be navigated. Changes will also be needed to the procedural rules used in the employment tribunals and to employment tribunal forms and other documents.

This decision could also be extremely expensive for the government (and ultimately the taxpayer). Back in 2013 when fees were first introduced, the Lord Chancellor gave an undertaking that, if the regime was subsequently found to be unlawful, all fees paid would be reimbursed by the Treasury. It is not yet clear how this will be done or what the position will be where a successful claimant has already had their fees reimbursed by their employer.

This also throws up the question of what will happen to claimants who were deterred from bringing a claim because of the high level of fees. This is not addressed in today’s decision. However it is possible that employees who chose not to bring claims may now do so, on the basis that it was “not reasonably practicable” for them to bring a claim when the unlawful fee regime was in place.

The phrase ‘landmark judgment’ is often overused by employment lawyers and commentators. However, this decision is truly deserving of the title.

Ben Daniel (ben.daniel@weightmans.com) is Head of Employment, Pensions and Immigration at Weightmans LLP and is based in Leeds.

Paul McFarlane (paul.mcfarlane@weightmans.com) is a Partner in the Employment, Pensions and Immigration team and is based in London.

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