On 29 July last year, for the first time since the creation of the Industrial Tribunals in 1971, a fee system was introduced for those wishing to bring an employment claim.

Two fees are now payable – an “issue fee” at the point at which the claim is made, and a “hearing fee”, due shortly before the hearing date. The level of the fee depends on the nature of the claim; for more straightforward claims (such as for deductions from wages), it is £160 at the issuing stage and £230 for the hearing stage, and for more complex claims (e.g. for discrimination and unfair dismissal) it is £250 to issue the claim and then £950 in advance of the hearing.

The philosophy behind fees

The official line is that the fees are not designed to deter claimants. The Government’s stated aims in introducing such a system are to transfer part of the annual cost of running employment tribunals (£84 million) to those who wish to benefit from them (claimants). The justification given for this significant change was based on “fairness”; Justice Minister Jonathan Djanogly said that it was “not fair” for the taxpayer to foot the entire bill, and that instead “people, where they can, [should] pay a fair contribution for the system they are using, which will encourage them to look for alternatives”.

There are, of course, numerous examples of taxpayers footing the bill for services which they may in fact never use.  So why the change of heart when it comes to employment tribunals?

The introduction of fees was part of the ongoing Employment Law Review announced as part of the Coalition Agreement in May 2010. The stated intention of the Government was to ensure that employment laws “maximise flexibility for both parties while protecting fairness and providing the competitive environment required for enterprise to thrive”. In relation to employment tribunal reforms, the Government cited concerns raised by businesses about the threat and cost of employment litigation; “the business community have consistently told Government that their biggest concern in relation to taking on staff is the employment tribunal system and that this fear ultimately acts as a barrier to growth”. The recession, and fears about such barriers to recovery, formed the backdrop to a number of reforms concerning workplace disputes, such as early conciliation, the rise in the qualifying period for unfair dismissal claims, protected conversations, and of course, the introduction of tribunal fees.

Legal challenges 

Unsurprisingly, the new fee system has proved controversial, with many arguing that it impedes access to justice.  In October last year, the High Court heard an application by UNISON for judicial review of the new system. UNISON’s case was put on four grounds. Broadly speaking, the first of these related to the UK Government’s obligation to give effect to European employment law rights, the argument being that as a result of the fees, some individuals would be unable to enforce their rights (this is known as the principle of effectiveness). Secondly, UNISON argued that it would be more difficult for individuals in the UK to enforce their rights than for employees in other EU countries (a breach of the principle of equivalence). Thirdly, it was said that the new fees system interferes with the public sector duty to promote equality, and fourthly, that it disproportionately impacts women and minority ethnic groups, as they are more likely to have claims to bring. Because in October 2013 there was a lack of real evidence about the impact of tribunal fees, UNISON argued its case on the basis of hypothetical would-be claimants and their predicted ability to pay the fees to which they would now be subject.

Although the challenge failed, the Court’s finding in relation to three of the four grounds was that they were potentially legitimate, but that it was too early to draw any conclusions about the effect of the new fees. For example, in relation to the first ground, Lord Justice Moses said:

The hotly disputed evidence as to the dramatic fall in claims may turn out to be powerful evidence to show that the principle of effectiveness, in the fundamentally important realm of discrimination, is being breached by the present regime. If so, we would expect that to be clearly revealed, and the Lord Chancellor to change the system without any need for further litigation.” [emphasis added].

One cannot help but wonder whether it was optimistic of the court to expect changes to the current system without either a further legal challenge or a change in Government (Labour has just announced that it would reform the tribunal system, with a focus on ensuring access to justice). However, further legal challenge is in any case afoot. On 18 September, the Court of Appeal will hear UNISON’s appeal against the High Court decision, and this time, rather than relying on notional claimants, it will go armed with hard evidence. The statistics for Employment Tribunal claims from January to March 2014 this year show that there were 59% fewer claims than the same period last year. The decline for the last quarter of last year was even sharper, with 79% fewer claims. Surely this constitutes the “powerful evidence” that LJ Moses had in mind when he gave judgement?

Justice denied?

So how can we reconcile these statistics with the Government’s assurances that the fees are not intended to reduce the number of claims and that those who cannot afford the fees will not be required to pay them?

There is in place a fee remission system which allows those wishing to bring a claim to apply for exemption from paying fees. However, questions have been asked about its effectiveness.

In July, the Citizen’s Advice Bureau published a survey of 182 clients with potential employment tribunal claims. Less than a third of cases assessed as having at least a 50% chance of success were deemed by the CAB advisor as likely to be taken forward by the individual. The most dominant reason given for this was concerns about costs or fees. Advisors also reported significant difficulties with the fee remission system. The system involves claimants filling out an application form with information about their income and assets and any benefits they may be in receipt of. However, the CAB reported that some applications were being rejected on grounds of applicants not having provided sufficient accompanying evidence, even where they had in fact done so, for example. One only has to look at the online guidance on fee remission to understand why some individuals might feel unable to navigate successfully through it. The guidance alone is thirty-one pages long and the application form is complex.

Good news for employers?

From the perspective of employers, a fall in tribunal claims is obviously to be welcomed. But the introduction of fees has also had some unwelcome consequences for business. Employers may have to wait months after an employee’s contract has been terminated before they know whether they will receive a claim, because of delays in processing fees and the fee remission system. And once a claim is underway, the employer will have to wait with baited breath to see if the claimant will put her money where her mouth is and pay the hearing fee.

In particular, issues have arisen from the fact that the Employment Tribunals have discretion as to exactly when the hearing fee is payable (the regime does not specify that the fee is payable a certain number of days or weeks before the hearing).  There have been reports of Tribunals failing to inform the respondent employer of when the hearing fee will be due and whether it has been paid, meaning the employer is in the dark as to whether the hearing will proceed.

To compound matters, some Tribunals have not been sending out a demand for the hearing fee until one or two days before the hearing itself. Claimants are then given seven days to pay, so they may not have paid the hearing fee before the hearing date and the Tribunal may de-list the hearing. By this point, the employer will have done most, if not all of its preparation for the case and incurred the associated cost, including any barrister’s brief fee.

Where do we go from here?

There is a big question mark over the future of tribunal fees and whether they will withstand the scrutiny of the Court of Appeal. If the dramatic drop in claims continues, the Government’s assertion that fees do not inhibit access to justice will look less and less tenable. For now, employers can relax in the knowledge that fewer employees are likely to mount claims, but must do so knowing that the tide may be about to turn.

Article by Virginia Allen, Senior Associate at Kemp Little