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Employment Tribunal Fees Ruled Unlawful- What happens now?

2nd August 2017

In a judgment given on the 26th July 2017 the Supreme Court unanimously ruled that the Employment Tribunal Fees Order of 2013, which introduced fees on issuing claims in the Employment Tribunal and the Employment Appeal Tribunal, was unlawful.

The immediate effect of the decision is that fees are no longer payable to the Employment Tribunal and for appeals to the Employment Appeal Tribunal (the EAT). The Government has promised to refund those fees that have already been paid.

The claim against the Government had been brought by the union UNISON. Prior to reaching the Supreme Court the claim had failed twice in the Divisional court and in the Court of Appeal.

The Government had introduced the fees (of £1,200 in order to bring a case to a hearing on unfair dismissal or unlawful discrimination), claiming it was necessary to reduce the number of malicious and weak cases, and that it was fair for the users of a system to pay towards the costs of that system. Subsequently, the number of cases being taken to the Employment Tribunal fell by some 70%- a far greater number than anyone could genuinely claim represented only malicious or weak cases that were previously being taken to the Employment Tribunal.

It is important to note that the challenge to the fees was not one based on a simple argument that the fees are a bad policy, the issue was whether or not they were unlawful. Parliament did not pass an Act of Parliament to introduce the fees, instead they were introduced by secondary legislation. In introducing secondary legislation the Government has to be able to show that it was acting within the scope of the main Act of Parliament under which the regulations were made, and that it was acting within accepted legal principles.    

The arguments presented by UNISON relied primarily on the established common law principles of English law, that the Government will not disproportionately restrict access to justice without the explicit authority of an Act of Parliament. The additional arguments were that the Fees Order was in breach of the European Convention on Human Rights, Article 6 of which guarantees the right to a fair trial, which includes access to justice, and that the Government cannot introduce an Order which restricts such access where the restriction goes beyond being proportionate given the legitimate aims underlying the Order. Thirdly the challenge was made that the Order had an unlawful discriminatory effect which could not be justified.  

In the leading judgment, Lord Reed noted the low level of most Tribunal awards, the poor record of enforcement of such awards, and the dramatic effect that the introduction of fees has had on the number of claims (particularly the low value claims). He noted that the fees have not reduced the proportion of unsuccessful claims (demonstrating that the Government argument about preventing unmeritorious or frivolous claims was misplaced), and that the introduction of the fees has not resulted in an improvement in the proportion of cases which had settled through ACAS. Lord Reed noted that if a legal right becomes inaccessible then: “laws are liable to become a dead letter.” He observed therefore that access to the courts is not just an issue for the direct users of the court, but is an issue of importance for all members of society.

Lord Reed noted that the level of the fees were at a point that simply could not be afforded by everyone, and that the fee remission scheme in place had resulted in only a very small number of people getting their fees waived. The Government failed to produce evidence to show why the fees had been set at the level they had. Lord Reed noted that the fees were set at a level that made it irrational or futile to bring small value claims, such as for small deductions or arrears of wages. He found that the effect of the fees was also a disproportionate effect on the right and ability to enforce rights under EU law.

On the argument about discrimination Lady Hale held that the fees did have a disproportionate effect on women (as to reduce the number of claims of sex discrimination would have a disproportionate effect on women compared to men). She went on to hold that the disproportionate effect (which the Government conceded), was not justified.

The effect of the ruling was that the Fees Order was quashed, which means that it was treated as being unlawful from day one of its existence.    

What will happen now?

Firstly, we should point out that it is unlikely that the Government will want to see a return of the number of claims being heard in the Employment Tribunals as was the case prior to July 2013, when the fees were introduced. So, it is to be expected that some form of fees will be introduced. We expect that to be done after a consultation exercise. In light of the criticism from the Supreme Court any new fees are likely to be set at a lower level than had applied, and it is distinctly possible that the employer (or rather former employer) may be required to pay a fee on submitting a defence to the claim. However, in view of the burdens on Government we do not expect this process to be started any day soon.

Secondly there will need to be a rather prompt re-writing of the Tribunal Rules to remove the references to fees and the impact of the fees on the operation of the Tribunal process.

Thirdly, the Government has promised to re-imburse the fees already paid. This is complicated by the fact that in many cases the Employment Tribunal will have ordered the employer (or former employer) to pay the fee as part of the compensation ordered. This will probably require a trawl through all the decisions of the Tribunals since the introduction of the fees, together with a further search to see which have actually then been paid (in order to determine who should receive the re-imbursed fees).

It is difficult to see how any re-imbursement can be assessed where a settlement was reached after the claims was commenced, rather than an order being made against the employer (or former employer) to pay the fees. Whatever the answer may be to that problem, we are confident that the point will be pursued.

As a slight side issue we have already read comments about the use of fees in the main Civil courts, and the deterrent effect that those fees have there. We are fairly confident that the Government will try its hardest to keep the impact of the ruling of the Supreme Court to the Employment Tribunal system only.

For those individuals that paid their fees to the Tribunal, and those employers that paid the fees as part of the compensation ordered by an Employment Tribunal you need to keep an eye on developments.        

If you need any further advice on any matter raised in this article do not hesitate to contact us at Hallett Employment Law Services Ltd.

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