The employment tribunals and courts have a significant role to play in the development of employment law, since it is their job to interpret and apply employment legislation. They also develop the principles of judge-made or 'common law' that govern important aspects of the employment relationship, such as the contract of employment and the employer's duty of care to safeguard the health and safety of its employees.
The legal significance of the ruling of a court or tribunal depends on the place of that court or tribunal in the legal hierarchy.
The decision of an employment tribunal is legally binding only on the employer and employee who are parties to the case. Employment tribunals hear the evidence and decide the facts, and it is not usually possible to appeal against their findings of fact. If a tribunal makes an error of law, however, the losing party can appeal to the Employment Appeal Tribunal (the EAT). A ruling from the EAT on the meaning of a particular piece of legislation must be followed by all employment tribunals, that is, it creates a 'binding precedent'. As a general rule, the EAT follows its own previous rulings, but there can sometimes be conflicting decisions from the EAT on the same point of law.
Appeals from the EAT go to the Court of Appeal in England and Wales and the Inner House of the Court of Session in Scotland. The rulings of the Court of Appeal are binding on employment tribunals in England and Wales and on the EAT. Although the Court of Appeal's rulings are not, in theory, binding on employment tribunals in Scotland, Scottish tribunals are very likely to follow them in practice. Likewise, the rulings of the Court of Session are binding on the EAT and on employment tribunals in Scotland, and are very influential on employment tribunals in England and Wales. The Court of Appeal and the Court of Session will usually follow their own previous decisions on the point of law they are considering.
From the Court of Appeal and the Court of Session, appeals on points of law can be made to the House of Lords. The decisions of the House of Lords are binding on all the courts and tribunals below it in the hierarchy. Although the Lords usually follow their own previous rulings, they may depart from them if they consider that a change in the law is required.
When the UK's courts and tribunals are interpreting UK employment legislation, they are under a duty to give that legislation a meaning that reflects the requirements of European Community law. For example, an employment tribunal that is interpreting and applying the Working Time Regulations 1998 must do so in a way that reflects the intention and content of the Working Time Directive.
On occasion it may not be clear what a particular piece of European legislation means. The court or tribunal may then decide to ask the European Court of Justice for guidance on how it should be interpreted. It does this by formulating the questions to which it would like a reply and referring them to the Court for what is termed a 'preliminary ruling'. It is usually up to the court or tribunal to decide whether it needs to make a reference to the Court for a preliminary ruling, and it may decide that it does not need the Court's assistance. If a question of the meaning of European law arises in the House of Lords, however, the Lords must make a reference.
In order to assist the Court in its deliberations, one of its members, known as the Advocate-General, prepares an Opinion, which suggests to the Court what decision it should reach. The Advocate-General's Opinion is often reported in the media as the decision of the Court. This is misleading as, although the Court will often follow the Advocate-General's Opinion, it does not always do so.
The process of making a reference for a preliminary ruling is lengthy. It can take two years or more for the Court to provide its guidance. Furthermore, the Court's ruling is not the end of the story. The court or tribunal that made the reference must then apply the Court's guidance to the facts in the case and reach a decision.