Supreme Court rules Employment Tribunal fees regime is unlawful

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In a highly anticipated and momentous judgment, the Supreme Court has unanimously allowed the appeal brought by the trade union Unison challenging the Government’s imposition of employment tribunal fees. In the Supreme Court’s view, the Employment Tribunals and the Employment Appeal Tribunal Fees Order 2013, SI 2013/1893 ("the Fees Order") denies people access to justice when it comes to the enforcement of their employment rights, and is therefore unlawful. Here, we consider the reasons for the Supreme Court’s decision and raise questions as to its likely impact.

Background

The majority of employment rights in UK law are granted by statute, including some legislation that gives effect to EU law. Most of these rights can only be enforced in the Employment Tribunals ("ETs"), with appeals to the Employment Appeal Tribunal ("EAT"). Historically, a claimant could bring a claim in the ET, and appeal to the EAT, without having to pay any fees. However, since July 2013, when the Fees Order came into force, claimants have been required to pay an "issue fee" to present a claim form to the ET and a further "hearing fee" before a tribunal hearing can take place.

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What fees are charged?

The amount of the fee depends upon the type of claim. Simple claims that generally only require short hearings, such as unlawful deductions from wages, are classified as "Type A" claims – for which the issue fee is £160 and the hearing fee is £230. More complex claims that typically require longer hearings, such as unfair dismissal, discrimination and equal pay claims, are classified as "Type B" claims – for which the issue fee is £250 and the hearing fee is £950. Different fee levels apply where there are multiple claimants. Fees are also payable to bring an appeal in the EAT, although these don’t vary depending on type of claim or number of claimants. A remissions system exists to assist the poorest claimants with full or partial payment of fees, though this is only available to claimants whose disposable capital and gross monthly income fall below specified thresholds.

Why were fees introduced?

The Government’s intentions in introducing the Fees Order were: to transfer part of the cost of operating the ETs and EAT from taxpayers to those who use the tribunals’ services; to deter unmeritorious and vexatious claims; and to promote earlier settlement of employment disputes.

What were the consequences?

However, the introduction of fees had a dramatic impact on the number of claims brought in ETs, with a comparison of the figures from before the introduction of fees with those from more recent periods demonstrating a long-term reduction in claims of the order of 66-70%. Indeed, this chimes with what we have seen at EEF: in the years up to and including 2012, our legal advisers handled an average of 1,100 ET cases per year for our members, but this dropped to an average of just 250 cases per year across 2015 and 2016.

Moreover, had tribunal fees succeeded in deterring unmeritorious claims, the percentage of claims that are successful at a final hearing would be expected to have risen quite significantly given the decline in overall claim numbers, whereas it has in fact fallen slightly since fees were introduced. There was also anecdotal evidence that the fees regime actually dissuaded some employers from settling claims early, as they waited to see whether would-be claimants "put their money where their mouth is" and pay the fees required to issue the claim and proceed to a hearing.

On what grounds did Unison challenge the fee system?

Relying in part on the significant decline in tribunal claims, Unison brought judicial review proceedings challenging the introduction of the Fees Order, on the basis that it was unlawful because the fees it imposes:

  • amount to an unjustified interference with the right of access to justice under both common law and EU law;
  • frustrate the operation of employment rights granted by statute; and
  • discriminate against women and other protected groups, who are more likely to bring Type B claims and are therefore disproportionately impacted by the higher fees applicable to such claims.

Unison was unsuccessful before the High Court and the Court of Appeal, but its appeal was unanimously upheld by the Supreme Court.

Supreme Court Judgment

The Supreme Court unanimously decided that the Fees Order had the effect of preventing access to justice. It was therefore unlawful from the date it was made and would have to be quashed.

Constitutional necessity

The Court emphasised that the courts exist in order to ensure that laws made by the democratically elected Parliament are properly enforced, and that an unimpeded right of access to the courts is therefore a constitutional necessity and fundamental to the rule of law. In the Court’s view, the ETs and EAT are more than mere providers of a public service that benefits only the parties to a case; the ability of individuals to bring claims and have their rights enforced by the ET provides a general societal benefit.

When testing the lawfulness of the Fees Order, the Court considered that the appropriate question to ask was whether there is a real risk that people would effectively be prevented from having access to justice, or whether the degree of intrusion into access to justice was greater than would be justified by the purposes of the Fees Order.

Comparison with court fees

The Court noted that, unlike court fees for small claims in the civil courts, ET and EAT fees are not in any way related to the monetary value of the claim. They could therefore be expected to deter the majority of ET claims, which are for modest sums of money or for non-monetary remedies (e.g. a statement of terms of employment required by S.1 of the Employment Rights Act 1996, or a declaration that a worker on a fixed-term contract is in fact a permanent employee).

Reimbursement in successful claims

The fact that a tribunal might order the employer to reimburse the fees paid where a claimant is successful could not be determinative, since the right of access to justice is not restricted to the right to bring successful claims.

Affordability

The Court referred to the dramatic and persistent fall in the number of tribunal claims brought (see ‘Background’, above) and to the fact that the fall in lower value claims and claims for a non-monetary remedy had been even greater. In a survey carried out on behalf of Acas in 2015, fees were the most frequently cited reason for not pursuing a claim, and the Court accepted that the question whether fees prevent access to justice must be decided based on their likely impact on potential claimants’ behaviour in the real world. Unison’s worked examples of the impact of fees on hypothetical claimants on low to middle incomes demonstrated that they would have to sacrifice spending that was ordinary and reasonable for maintaining their living standards if they wished to meet the fees. On that basis, the fees could not be regarded as affordable.

Futility

In addition, even affordable fees may prevent effective access to justice where they render it futile or irrational to bring a claim, e.g. where the amount sought is modest or the claim is one for which the remedy is non-financial, such that no sensible claimant will bring a claim unless they are virtually certain that they will succeed, will recover their fees as part of the award, and that the award will be satisfied in full.

Effectiveness of fee system

The Court noted that the stated purposes of the Fees Order (see ‘Background’, above) were legitimate aims. However, while it had been partially successful in achieving the first of those aims (namely – to transfer part of the cost of operating the ETs and EAT from taxpayers to those who use the tribunals’ services), the Government had not demonstrated that the Fees Order was the least intrusive means of achieving that aim. There was no evidence that less onerous fees, or a more generous system of remission, would have been any less effective in meeting the objective of transferring the cost burden to users.

EU law

While the main focus of the Court’s judgment was on the position under UK law, the Court also found that the Fees Order breached the EU law guarantee of an effective remedy before a tribunal in cases concerning the enforcement of employment rights derived from EU law.

Discrimination

Finally, the Court concluded that the Fees Order is indirectly discriminatory because the higher fees for Type B claims put women at a particular disadvantage, given that a higher proportion of women bring Type B claims than bring Type A claims, and charging higher fees for Type B claims was not a proportionate means of achieving the stated aims of the Fees Order.

Comment

The Supreme Court’s detailed and thorough judgment in this case is of fundamental importance to the employment law landscape and will have a significant impact. Indeed, the Government has already taken immediate steps to stop the charging of fees as the Employment Tribunals' website confirms that no fees are now due. Given the dramatic fall in tribunal claims that followed the introduction of fees (see ‘Background’), their removal may well prompt a similarly dramatic spike in claims going forwards.

It is also being reported that the Government has confirmed it will refund fees paid by employees (and presumably also by employers) since the Fees Order came into force in July 2013. This move is perhaps unsurprising given the strength of the Supreme Court’s condemnation of the fee regime, but it does raise some practical questions. For example, where a claim was settled after payment of tribunal fees and the employee received a reimbursement of those fees as part of the settlement, arguably it should be the employer rather than the employee who receives the payment from the Government, but will any system established to handle reimbursement of fees have the ability to identify such cases?

A further question is whether individuals who were deterred from bringing ET claims, and whose claims are now out of time, will seek to bring those claims now and persuade the tribunals that it is just and equitable to extend time. Or might some such individuals try instead to claim compensation directly from the Government? Such claims may be possible for those whose claims are based on EU law rights, who could argue that the Government should be liable for its failure to provide an effective remedy as required by EU law.

In the longer term, it is likely that the Government will seek to introduce a revised fees regime – indeed, the judgment in this case certainly leaves this open as a possibility. However, this will presumably take some considerable time as Parliament is on its summer recess and any new regime will have to be subject to consultation and detailed analysis to ensure that fees are set at a reasonable and appropriate level to maintain access to justice.

We will keep members updated on any developments resulting from this case. In the meantime, if you have any questions about its impact, please contact your usual EEF Adviser.

 

If you are not a member of EEF, our HR and employment law experts can help you with any issues related to employee relations. Get in touch.

Author

Senior Legal Adviser

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