UK: Employment Tribunal Fees Are Unlawful And Will Have To Be Repaid By The Government

Last Updated: 11 August 2017
Article by Hugh More

The Supreme Court has unanimously held that the introduction of the current fee system in the Employment Tribunal and Employment Appeal Tribunal – via a Fees Order in force from 29 July 2013 - was unlawful under both domestic and EU law, as it prevented access to justice and was indirectly discriminatory. The case is a significant instance of the rule of law restraining the power of the executive.

In light of the judgment, the Fees Order is therefore invalid and no fees will be payable under it going forward. The Government will also have to refund up to an estimated £32million to people who have brought employment claims since the fees were introduced.

Background

The Fees Order required a claimant to pay an 'issue fee' when a claim form was presented to an Employment Tribunal and a further 'hearing fee' shortly before the hearing of the claim. There were three stated policy objectives: to transfer some of the cost of the Employment Tribunals system from general taxpayers to system users; to incentivise early settlement by adding an element of cost; and to dis-incentivise unreasonable behaviour, such as bringing weak or vexatious claims.

There were two categories of fee:

  • type A claims (typically requiring little or no pre-hearing work and short hearings). Fees for this type of claim totalled £390; and
  • type B claims (typically more substantial issues, requiring greater pre-hearing work and hearing time – unfair dismissal and discrimination fell into this category). Fees for this type of claim totalled £1,200.

There were limited provisions for remission of fees, depending on a claimant's capital and disposable income.

The trade union UNISON had challenged the making of the Fees Order, which was the product of secondary legislation introduced by a Minister of the Crown, rather than an Act of Parliament. UNISON argued that it was not a lawful exercise of statutory powers, because (i) it interfered with access to justice (under both UK and EU law) and in doing so went further than was proportionate and (ii) discriminated unlawfully against women and other protected groups.

Judgment

The Court agreed. It held that the Fees Order would be unlawful, if there was a real risk that potential claimants would be effectively prevented from having access to justice or if the degree of interference with access to justice went further than was justified by the purpose of the Fees Order. The Court noted that the effect of the Fees Order had been a dramatic fall in the number of claims brought, most acutely in the number of lower-value claims and claims in which a financial remedy was not sought. While (as the Lord Chancellor argued) the poorest claimants should qualify for full fees remission, the wider picture was that households on low to middle incomes could only afford fees by sacrificing their ordinary and reasonable expenditure, such that those fees cannot be regarded as affordable.

Even where fees were affordable for claimants, they would (the Court held) prevent access to justice where they rendered it irrational to bring a claim. The Court described the system overall as 'penalising claimants according to the complexity of their claims', while noting that – unlike in the County and High Courts – fees had no correlation with the value of the claim. The Employment Tribunal system was designed to allow relatively small claims (for holiday pay or unlawful deductions from wages, say). But, the Court noted, no sensible person would pay fees of £390 to pursue a claim of £500 unless he or she was virtually certain that they would succeed and their employer pay the award.

The Supreme Court also found (in a judgment given by Lady Hale, who becomes President of the Supreme Court in October) that the Fees Order particularly disadvantaged (and so, was indirectly discriminatory to) women. A higher proportion of women bring type B rather than type A claims and a variety of factors meant that the fees regime was not a proportionate means of achieving its own stated aims.

Implications

The judgment is likely to have significant short-term and long-term effects.

It is reported that Employment Tribunals are now refusing to take fee payments where claims are presented in person, and that steps are being taken to remove the requirement to pay for online claims.

While the Government will have to refund the fees of those who did bring claims during the lifetime of the Fees Order, it remains to be seen what the position of those who might have brought claims (but, due to the Fees Order, did not). It is possible that employers will receive claims from long-gone employees, arguing that it was 'not reasonably practicable' (due to fees) for them to have been presented sooner and asking the Tribunal to exercise its discretion to accept the claim.

It seems clear that the fees regime has had a significant deterrent effect, shielding employers both from potentially meritorious claims and unmeritorious, opportunistic claims. The removal of the fee barrier is likely to see the number of claims in the system rise. It remains to be seen whether (and if so how) the Government will make further changes to the Employment Tribunals system as a result. One option would be further changes to the existing (but historically under-used) 'deposit order' mechanism, which allows Judges to order claimants to pay up to £1,000 per allegation or argument which a tribunal considers has little reasonable prospect of success.

Or – since the Supreme Court has primarily criticised the level and structure of fees, rather than the principle – the Government may be tempted to explore a more nuanced system of shifting the cost of the Tribunal system onto litigants.

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.

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