This article was first published on by LexisNexis on 22 November 2016.
‘Tribunal fees cause 73% reduction in unfair dismissal claims’—what is the background to this statement?
This was the headline grabbing statement made by the TUC recently, as it attempted to apply pressure on Theresa May to follow the example of the Scottish Government in its promise to abolish Employment Tribunal fees.
The TUC also reported a slump in race, sex and discrimination claims, leading them to claim discrimination in the workplace was being allowed to ‘flourish unchecked’.
Unison has been involved in a well publicised judicial review challenging the introduction of fees. What many may forget is that the government pledged that, if the action is successful, it would reimburse the fees of those who had brought claims. While so far that has been unsuccessful, the Court of Appeal stated it was ‘troubled’ by the drop off in tribunal claims following the introduction of fees. The case proceeds to the Supreme Court on 27 and 28 of March 2017.
What is the source of this study?
Although the TUC has published these figures, they originate from the Ministry of Justice who publish quarterly statistics on tribunal use throughout the year, as well as annual statistics. The Ministry of Justice figures are taken from a live administration system managed by Her Majesty’s Courts and Tribunals Service specifically for the purposes of the study.
What are the key findings from the study?
In addition to the reduction in unfair dismissal claims, the TUC also pointed to evidence from the Ministry of Justice Study that shows a 71% drop in sex discrimination claims, a 58% drop in race discrimination claims and a 54% drop in disability discrimination claims. Overall the total drop in claims since the introduction of fees was 60%. However, in the years 2013/14 and 2014/15 there had been a year-on-year reduction in claims, whereas in 2015/16 for the first time there was an increase in the total number of claims made, compared to the previous year. However, there are several potential explanations for this which are unrelated to fees including the significant number of holiday pay claims currently being made following changes to how holiday pay is calculated.
How has the impact of fees and early conciliation impacted upon the advice given by lawyers to employers and employees?
Lawyers should advise their clients (whether workers or employers) that tribunal fees are required to be paid by claimants unless they are exempt due to their financial circumstances. Basic monetary claims, such as unpaid wages have an initial fee of £160 and a full hearing fee of £230. These fees increase to £250 and £950 respectively in more complex unfair dismissal and discrimination claims.
While successful claimants can seek to reclaim their fees from their employer as part of their award, many will be out of work at the time they consult lawyers. If the worker needs to pay the fees this is often an added disincentive to pursuing the claim.
There is the further complication of the introduction of mandatory Advisory, Conciliation and Arbitration Services (ACAS) early conciliation, which applies to most claims made on or after 6 May 2014. A claim cannot be brought without the claimant first approaching ACAS who will seek to conciliate a settlement between the parties. ACAS will issue a certificate allowing a claim to be presented to the Employment Tribunal if the matter is not settled.
An employer’s lawyer may advise the client to sit back and wait to see if early conciliation is started within the necessary time limit—if it is not a tribunal claim will not normally be allowed to proceed.
If, however, a successful claim is likely, an employer’s lawyer may, in limited circumstances, advise the client to try and settle at the early conciliation stage. However, lawyers are well aware that claims can be settled right up to the ‘door of the court’.
As a result, given the widespread knowledge about the drop in claims, in many cases an employer’s lawyer is likely to advise the client to initially defend the claim to ‘see the colour of the claimant’s money’ if a tribunal fee is required to be paid.
The advice by lawyers to claimants will be different. If the worker has trade union support then the trade union member may not have to pay fees. The lawyer instructed by the union is likely to pay closer attention to the likely prospects of success in advising whether a trade union should financially support a particular claim. In addition the trade union member may be asked to sign a loan agreement in relation to the trade union, funding their tribunal fees. This became a common practice in holiday pay claims.
Has the introduction of tribunal fees created a better balance in the employer-employee power dynamic—or has it made things worse?
Prior to the introduction of the fees, many employers felt that employees very much held the upper hand and that the system was too user or employee friendly. Without a doubt some claimants did make unmeritorious claims purely to see if their employer would pay them compensation rather than incur the costs and disruption to business that defending such a claim can cause. However the drop in claims being made cannot be accounted for purely by the removal of claimants pursuing speculative claims.
This conclusion is supported by a recent report by the Justice Committee which concluded that the introduction of fees had an ‘unacceptable impact on access to justice’. The Committee had heard evidence from a broad range of interested parties including the Council of Employment Judges who said in written evidence that ‘misguided but determined litigants remain undeterred by fees’. Not surprisingly the evidence suggested that there has been a disproportionate impact on low value claims often related to unpaid wages, redundancy or notice pay—the Council of Employment Judges gave evidence that there were ‘few defences to such claims and they often succeeded’.
While the number of vexatious claims that were made prior to the introduction of fees was probably not as high as some employers believed, it did appear to be a growing problem prior to the introduction of the fees. The evidence placed before the Justice Committee does suggest that there has been a swing in power from employee to employer as a result of the introduction the fees, and that the pendulum of power has swung too far the other way, failing to find a fairer middle ground.
What is the difference in the requirement to pay fees north and south of the border?
At the moment there is no difference. Whether a worker is bringing a claim in England and Wales or Scotland the same fees are required to be paid. However, the Scottish Government announced, as part of its legislative programme for 2015/16 (‘A Stronger Scotland—The Government’s Programme for Scotland 2015/16’) that it will abolish tribunal fees in Scotland. It can do this by virtue of powers under the Scotland Act 2016 although the timetable for when abolition will happen remains unclear. This is due to the fact that the administration of the Employment Tribunal system is to be a devolved matter.
Are fees likely to be abolished in England and Wales as well?
That is an unknown but seems unlikely. It is more likely that fees will be lowered in some cases rather than completely removed, which would still assist in achieving one of the government’s aims to shift some of the financial burden of the tribunal system onto its users.