Employment Tribunal fees – history repeats itself?

The Government has decided to introduce a system of fees in Employment Tribunals.  A consultation exercise asking for views on different options has just concluded.  Paul Statham of Pattinson & Brewer solicitors who co-chaired a committee of the Employment Lawyers Association summarises their response.  

In October 2004 the Government introduced the statutory dispute resolution procedure[1].  There was a consultation exercise before it was introduced to which the Employment Lawyers Association (“ELA”) responded in a highly critical way.  This criticism was ignored by the government and the result was chaotic legalism and untold satellite litigation for the next four years until their wholesale repeal in April 2009[2].  Paul Statham and Peter Wallington QC co-chaired a working group to prepare the ELA’s response to the Ministry of Justice’s (“MoJ”) consultation paper on fees in Employment Tribunals. Over 40 members of ELA, representing both claimants and respondents contributed to drawing up the response, which runs to 70 pages.  This article can only highlight the key points of ELA’s response, but there was a consensus that was highly critical of the workability of the proposals and a fear that tribunals could again be plunged into an era of uncertainty caused by satellite litigation.  Could history be about to repeat itself?

What Is the Government’s Rationale for Introducing Fees?

These are stated to be the transfer of part of the cost of the ETs from the Exchequer to users, whilst developing a simple, easy to understand and cost-effective fee structure, maintaining access to justice for those on limited means and encouraging users to resolve issues as early as possible.

If Option 2 is adopted, there is the additional rationale of providing respondents with some certainty as to the level of damages

ELA’s response flagged up serious concerns which they believe demonstratede that these objectives will not be achieved and are likely to have the opposite effect.

 

What is Proposed

There are two options:

  • Option 1 involves a fee charged to the claimant when the claim is presented, and a second fee, again paid by the claimant, to proceed to a hearing.
  • Option 2 would involve a single fee charged at the time of presenting the claim, and again payable by the claimant.

 

Under both options there would be three levels of fees, based on the highest category of claim made (so a complaint of discrimination and/or unfair dismissal will attract the highest rate fee applicable to discrimination cases). The banding of fees would apply to both stages under option 1, and to the single fee under option 2.  The bands copy the categorisation currently used by the tribunal administration to split claims into short, standard and open tracks.

The proposed fee levels seemed high to ELA: under Option 1 £150, £200 or £250 on presenting the claim, and a further £250, £1,000 or £1,250 hearing fee; the Option 2 fees are £200, £500 or £600 for claims not over £30,000. For the latter, a fee of £1,750 is payable, with a cap on compensation if this fee is not paid on presentation of the claim.  By way of comparison the fee for an appeal and hearing in the Supreme Court only requires payments totalling £1,600, again including the hearing fee.

There are also horrendously complicated proposals for fees for multiple claims, based on the number of claimants in the multiple when the fee falls due.

In contrast to the Civil Courts, it is intended that there will be no refunds of fees by the ET if a claim settles or is withdrawn.  There will be a discretion for the ET to order the respondent to reimburse any fees paid by a successful claimant.

Fees are proposed for various applications made in the course of proceedings, such as to set aside a default judgment or for a review or written reasons, payable in each case by the party applying. In the EAT there will be an initial fee of £400, and a further fee of £1,200 if the appeal proceeds to a hearing.

 

Remission of Fees

The remission scheme proposed is that used by HM Courts and Tribunals Service for remission of fees in the civil courts. It appears to have been assumed that this works reasonably well in those courts.  This ignores the following fundamental differences:-

  •  the very short time limit of usually three months, compared to three or six years for most civil claims,
  •  the fact most claimants who are recently dismissed, may be disqualified for benefits because of the reason for dismissal, or still be in receipt or deemed receipt of pay in lieu,
  • many more claimants in the ET are not represented, and
  • many claimants receive no advice before presenting their claims.

Exemption will have to be claimed on presenting a claim, with all required supporting documentation, as a condition of acceptance. Many claimants will simply not have the paperwork required to support an application for remission.

The MoJ estimate that the proposals will generate about £10 million of the £84 million the ETs currently cost. A significant factor in this estimate is the proportion of cases where fees will be remitted, in whole or part (and the associated costs of handling remission applications and appeals). In reality, in ELA’s view, net revenue is likely to be much lower, because the MoJ have grossly underestimated the costs incurred in handling a complex and confusing set of criteria for remission.  Access to justice and concerns about Equality Act claims will require the widest possible means of making payment, including payment by cash at tribunal offices.  This will increase the cost of administration.  ELA proposed the payment of fees at Post Offices in return for a receipt that could then accompany a claim form.

ELA were particularly concerned that the MoJ proposes that claims presented without the correct fee or a valid application for remission will not be accepted.  Time will not be suspended or claims conditionally accepted subject to paying the fee, or applying for remission, within a stated period.  ELA have suggested such a system is essential if tribunals are not to become mired in satellite litigation about extensions of time for claims refused at the very end of the time limit and treated as time barred when re-presented a few days later.

There are three ways to get a fee remission. The first is being in receipt of one of a list of income related benefits, such as income-based Jobseeker’s Allowance. There appears to be no consideration of the fact many dismissed employees will be disqualified up to or just before the three month time limit so there is an incentive to lodge claims at the end of the three month time limit when there is a chance of a full remission.

The second route is to have a gross annual income of less than £13,000 if single, £18,000 for a couple, with modest additions for dependent children.  This is also problematic. If income is to be assessed historically, how can the loss of income following dismissal be taken into account? How do claimants who were paid in cash with no proper payslips prove levels of income?  How can the system ensure that a spouse or partner’s means are correctly taken into account?

The third route is based on disposable income, computed under the means criteria for Legal Aid; disposable income of or below £50 a month confers complete exemption; above that level, there is a liability for a fee of £5 for every extra £10 of monthly disposable income. The formula for calculating disposable income is very complex. However, the MoJ estimates that for the highest levels of fees it is expected to confer at least a partial exemption to 90% of claimants liable to pay the £1,750 fee.  The figure for the other two routes is 26%.

History repeating itself?

ELA drew attention to a number of unintended and undesirable side effects of the proposed fee regime. These include

  • Employers may not considering settlement until the employee pays the fee. This would potentially completely undermine the proposed change in ET procedure under which all claims will go first to ACAS to allow an opportunity for settlement, before being formally presented.  There appears to be no joined up thinking on this.
  • Likewise, once proceedings are under way employers may be unwilling to settle unless and until the employee pays the hearing fee (under Option 1). Conversely employees with exemption from paying may be unduly advantaged in negotiating with their employer.
  • Employees whose financial circumstances have deteriorated following dismissal may delay presenting claims to the last moment in the hope of qualifying for remission of the fee, thus prolonging the litigation process.
  • The proposals for multiple cases are likely to encourage the fragmentation of claims, increasing rather than decreasing the ETs’ workload.
  • ELA consider the proposal to charge respondents £750 for judicial mediation will mean there will be no mediations once a fee is required.
  • ELA consider there should be some claims that are exempt from the requirement to pay a fee such as enforcement action by HMRC under the National Minimum Wage Regulations, claims for protective awards brought by representatives on behalf of affected employees, and claims against the Insolvency Service. ELA also felt it would be unfair to charge prospective appellants £400 for their appeal to the EAT to be rejected on a paper sift.
  • ELA considers there should be a right to pay the Level 4 fee later in the proceedings if it becomes clear that the claim may be worth more than £30,000.
  •  The introduction of a fee regime will raise expectations about the expected service, particularly if there is no system of refunds.  Litigants will expect to get a proper service if they pay for it.  They may demand redress if they do not get it. Examples of cases where refunding fees would in ELA’s view be justified, are applications to set aside default judgments issued after a failure by the tribunal to send the ET1 to the respondent’s correct address, and litigants condemned to be ‘floaters’ on the day of the hearing, at often considerable cost in wasted legal fees and travel costs.
  • The failure to refund fees when a case is withdrawn or settled may act as a further disincentive to the parties settling as there will be inevitable arguments about who pays the fees. There is a system of fee refunds in the Civil Courts when a claim is settled or withdrawn within a reasonable time of a hearing
  • ELA were concerned about how the tribunal discretion to order respondents to repay fees to successful claimants will operate, not least because of the impossibility of defining ‘winning’ to cover all eventualities. This is a recipe for further satellite litigation and will inevitably form part of settlement negotiations potentially leading to fewer claims settling.
  • ELA were most concerned about ensuring access to justice and anticipate that the Equality Impact Assessment, which is only expressed to be provisional, has failed to take account of the disproportionate impact the fees proposals may have on various claimants with protected characteristics under the Equality Act.  Already there is talk of a Seymour Smith[3] type challenge, which could create years of uncertainty about the legality of a fees regime.

Conclusion

ELA hope the MoJ will takes account of the many responses to the consultation, including their own and rethink their proposals, especially about the level of fees, extending time limits when a claim is lodged without the correct fee and the possibility of refunding fees when cases settle or are withdrawn.  Otherwise ELA fears that history will repeat itself.

Paul Statham

Partner

Pattinson and Brewer

 

www.pattinsonbrewer.co.uk

[1] The Employment Act 2002 and Employment Act 2002 (Dispute Resolution) Regulations 2004

[2] On 6 April 2009 the 2004 regulations were repealed and replaced by a new framework based on the provisions of the Employment Act 2008

[3] R v Secretary of State for Employment ex p Seymour-Smith  [2000] ICR 244, House of Lords

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