Balance of power has shifted to employees, says Mayer Brown’s Caroline Mathews
The decision in the case of UNISON v Lord Chancellor has led to one of the biggest changes in the employment tribunal since the fees regime was introduced in July 2013.
Some four years after the introduction of fees in the employment tribunal and Employment Appeal Tribunal (EAT), the Supreme Court has ruled that the fees prevented access to justice and were unlawful as a matter of English common law and EU law, as well as being unlawful under the Convention on Human Rights. Consequently, fees in the employment tribunal were scrapped with immediate effect from 26 July 2017.
Prior to July 2013, there were no fees for issuing claims in the employment tribunal.
In July 2013, the Fees Order introduced fees into the employment tribunal, dividing claims into two categories: Type A and Type B claims and the cost varied depending on the type of claim that was issued. Type A claims, which were generally claims relating to statutory redundancy, unlawful deduction from wages and breach of contract, cost £390 (issue and hearing fee combined). Type B claims, which were generally claims relating to discrimination and whistleblowing, cost £1,200 (issue and hearing fee combined).
Following the introduction of the regime, the tribunal service experienced a downturn in the number of claims being issued and by October 2013, it was estimated that there had been a reduction of nearly 70% in the number of employment tribunal claims issued. UNISON, the public sector trade union, challenged these fees, claiming that they prevented access to justice for many claimants, especially those with lower incomes.
UNISON’s challenge began in February 2014 by way of judicial review, followed by further proceedings in September 2014 and August 2015, all of which were unsuccessful.
The Supreme Court heard UNISON’s case in March 2017 and it was at this stage that UNISON experienced its first ground-breaking success, with the fees regime being abolished with immediate effect. As with any change in the legal system, questions have arisen as to what the abolition of fees will mean for the tribunal system. While it is still early days, the potential impact of this decision warrants consideration.
Increase in claims
While official figures have not been released, it has been reported anecdotally that there has already been a marked increase in the number of claims being issued at employment tribunals, in both England and Wales. While this is of no surprise, this will cause some concern to employers and is likely to make them more aware of the risks they take when dismissing individuals. Employers will have to accept that if a decision is likely to be unpopular with the workforce, it is now more likely to lead to legal action being taken against them.
Although the increase in the number of claims is predictable it is unlikely that we will see an increase to the pre-Fees Order level. The ACAS Early Conciliation process, introduced in April 2014, is still a mandatory step for all potential claimants. It is probable therefore that this procedure will still keep a proportion of claims out of the employment tribunal, by resolving them ahead of the issue of proceedings.
However, employers may need to reconsider how actively they engage in the ACAS process, as the tactic of waiting to see whether a claim is issued before engaging with settlement discussions is unlikely to apply now, as potential claimants no longer face the initial hurdle of having to find the money to issue a claim. One potential outcome may be that we see more cases being settled during the ACAS Early Conciliation process, thus putting a greater strain on ACAS.
Alternative fee regime
Although the Supreme Court found that the employment tribunal’s fee regime was unjust and prevented access to justice, the justices did not rule out the possibility of the government introducing a fee structure that would be lawful, with fees perhaps being at a lower level or on a different charging scale, which takes into account the potential value of the claim.
Although this is a possibility, we believe that there’s unlikely to be a new fee regime introduced as a matter of priority, especially while Brexit negotiations are ongoing. The government will also be aware that they have been successfully challenged once and they will therefore want to ensure that any new regime that is introduced is considered to be lawful, to avoid the embarrassment of being challenged for the second time.
Employment tribunal fees refund?
Not only did the Supreme Court scrap the fees regime, it also declared that all those who had paid fees would be refunded.
This has caused some concern, as it is possible that a claimant may be able to double recover, unless a sophisticated system is introduced to issue these refunds.
In many cases, when a claimant was successful at the employment tribunal, the respondent was ordered to pay the value of the claimant’s employment tribunal fees in costs. If a simple system of refunding all claimants their employment tribunal fees is introduced, many claimants will recover money which has clearly been paid to them by the employer.
Although no decision has been made as to how such refunds will be issued, careful consideration will need to be given to this stage of the process. A system will need to be introduced that obtains information from both parties, to clearly assess whether a refund is due. It is therefore likely that we will experience a delay in claimants receiving refunds, until an agreed process is announced.
Impact on the tribunal service
A reduction in the number of claims from 2013 and cuts within the judicial sector has led to the administrative services within the employment tribunal being slimmed down. With claims set to increase, this is likely to put a strain on the employment tribunal. Many claimants and respondents are likely to see delays in the case management of claims, as the employment service readjusts and adapts to the changes in volumes of cases.
Increased trade union activity
Although UNISON was unsuccessful at every court before the Supreme Court, the group’s ultimate success and the publicity it has attracted could encourage membership of trade unions and support for trade union activity. Without the support of UNISON, it is unlikely that this case would have been brought by an individual.
There remain some uncertainties about how the abolition of tribunal fees will impact on those involved in litigation, or even potential litigation, but one thing is certain: the process to bring a claim is now free, allowing access to justice for all and thus creating an increased risk to employers.
What next?
The case is a watershed for the government, employers, employees and the tribunal system. It is likely to mean increased claims, and that the balance of industrial power has shifted towards employees and trade unions, for the first time in many years.
Caroline Mathews is an employment and benefits associate at Mayer Brown.