What is new?
A new fee regime will take effect for employment claims brought on or after 29 July 2013.
Over recent years there has been a significant amount of criticism, particularly from employers and insolvency practitioners about the 'claim culture' of the employment tribunal system. Currently it is free for a claimant to submit a claim to the employment tribunal. This means that there is little to discourage a recently dismissed employee or a trade union representative acting on such an employee's behalf, from bringing a claim or actively considering settlement. The government has indicated that the purpose behind the introduction of fees is not to deter claimants but to discourage vexatious claimants and to encourage settlement.
Under the new fee regime, an individual employee or their trade union representative, if the union agrees to pay, will need to pay a fee of between £160 and £250 (which depends on the type and complexity of the claim) to submit an employment claim. There is a further fee for the claimant or union representative of either £230 or £950 in order to proceed to a hearing.
Type A claims are typically lower value claims for sums due on termination of employment such as unpaid wages, a claim for a redundancy payment and notice payments.
Type B claims include all other claims for example unfair dismissal and discrimination.
For insolvency practitioners dealing with multiple claimants bringing the same claim (such as a claim for failure to inform and consult under TUPE or collective consultation law), under the new regime the issue fee and hearing fee increases in line with the number of claimants as follows:
What difference will these changes make for employers and insolvency practitioners?
As yet it is not certain how often trade unions will be prepared to pay the issue and hearing fees on behalf of their members. On the whole, trade unions have been opposed to the new fee regime and UNISON has applied for judicial review of the decision to introduce it. However, this will not prevent the new regime from taking effect on 29 July this year.
The new fees may make employees and unions less inclined to bring claims that have little prospect of success when previously then was little disincentive to stop them from bringing unmeritorious claims. Due to the additional costs, an insolvency practitioner may want to defend claims rather than risk diminishing returns to unsecured creditors.
In practice we expect to see the cost of settling claims rise. This is because an employee or a trade union that has paid the issue fee will on behalf of its member(s) expect the cost of this fee to be added to a settlement payment.
There may also be a degree of disarray and delay around the time the new regime is introduced. We anticipate that there will be a spike in the numbers of claims submitted to employment tribunals before the deadline to avoid the new fees. This, combined with the introduction of brand new system, may mean that there are a few teething problems for parties to deal with.
On a final note, there may be additional costs for respondent employers or insolvency practitioners. Under the new regime, employment tribunals will be given a discretionary power to order the losing party to reimburse any fees previously paid by the successful party. It is not yet known whether employment tribunals will take into account the insolvent status of the employer when determining whether to make an order for reimbursement for fees. Insolvency practitioners should weigh up this risk when deciding whether or note to defend tribunal claims.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
