Tribunal Fees – a considered response

Partner and employment law specialist Paul Statham considers the reasoning and likely consequences of the Government’s recent proposals regarding fees for Employment Tribunals…

The Ministry of Justice on Friday published its response to the consultation on introducing a fee regime in employment tribunals https://consult.justice.gov.uk/digital-communications/et-fee-charging-regime-cp22-2011  .

Justice Minister Jonathan Djanogly said:

“It’s not fair on the taxpayer to foot the entire £84m bill for people to escalate workplace disputes to a tribunal.

“We want people, where they can, to pay a fair contribution for the system they are using, which will encourage them to look for alternatives.

“It is in everyone’s interest to avoid drawn out disputes which emotionally damage workers and financially damage businesses. That’s why we are encouraging quicker, simpler and cheaper alternatives like mediation.”

But what does it mean? In summary the Government has confirmed it will implement a system whereby claimants pay an initial fee to issue a claim and a further fee if the claim proceeds to a hearing.

Under the new system, there will be two “levels” of claims. For level one claims which are generally for sums due on termination such as unpaid wages, pay in lieu of notice and redundancy pay the issue fee will be £160 and the hearing fee will be £230. For level two claims (all other claims), the issue fee will be £250 and the hearing fee will be £950.  The original proposal was for 3 levels with unfair dismissal in the middle level.  Now unfair dismissal is grouped with discrimination claims in the highest fee band.

There are complex proposals in respect of  multiple claims with a potential total fee of £2340 where there are over 200 claimants in one claim.

The proposal to charge a fee for written reasons for dismissal is abandoned but a fee for judicial mediation of £600 is retained and is to be paid by the respondent with fees for reviews costing £100 and applications to dismiss following settlement of £60 paid by whoever seeks the order.

The fee for lodging an appeal to the EAT is £400 and if it is allowed to proceed to hearing a further £1200.

The tribunal will have discretion to order the losing party to reimburse fees paid by the winning party.

The Government propose using the current civil courts remission system to protect claimants who cannot afford to pay the fees.  However, ominously they are proposing a review of the system to ensure it is compatible with the new Universal Credit due to be introduced in late 2013 and “concerns raised by respondents” (paragraph 145).  Since most of the concerns listed are from business respondents complaining too few claimants will pay fees under the current system it is not anticipated that the consultation will result in more claimants not paying fees.

What is Wrong With These Proposals

1. The proposals are likely to lead to a substantial reduction in the number of claims.  By way of example in breach of the Working Time Regulations a building sub-contractor works 3 months on a building site and is not paid his 7 days accrued holiday pay worth £350.  He would have to pay £160 to issue the claim and £230 for a hearing, a total of £390.  There is no guarantee the contractor will pay any judgment or that the tribunal will order the fees to be refunded if the claim is contested.  As a shop steward said to me last week, he would be better off stopping at the bookies on the way to the tribunal at putting his fee on the favourite in the 3.30 at Kempton Park.
2. An even starker example is the employer in financial difficulties that closes overnight without paying notice pay, wages or accrued holiday pay.  The employee can recover the unpaid sums from the state redundancy payments fund but only if the employer becomes insolvent.  The Redundancy Payments Office insists on the employee taking tribunal proceedings.  Since there is little or no prospect of any fee being paid by the employer in such circumstances it is only worth the employee taking proceedings to enforce their statutory rights if the sum outstanding is more than £160 (or £390 if the employer puts in a response so the case goes to hearing).
3. There are many important employment rights where there is no compensation available to be awarded or the maximum award of compensation is less than the total fees payable by the claimant.  For example an employee can apply to the tribunal for a determination of terms where the employer fails to provide a written statement of terms and conditions of employment or an itemised wage slip.  There is no prescribed remedy for breach.  It will cost a total of £390 in fees for the privilege.  Likewise a breach of S.11 of the Employment Relations Act (failure to allow an employee to be accompanied at a disciplinary or grievance hearing) provides a remedy of 2 weeks pay (maximum weeks pay is £430) so the maximum compensation is £860.  The fee to a hearing is £1200. No one will bring claims under these provisions when tribunal fees are introduced.
4. Under S.11 of the National Minimum Wage Act 1998 a failure by an employer to give an employee access to wage records has a remedy of 80 x the hourly minimum wage rate (currently £6.08) a total of £486.40.  The fee for bringing this claim is £1200.  Whilst it is hoped the HM Court and Tribunals service fee remission system will apply that may not be the case if the employee is married and the total gross annual income is £18,000.
5. The HM Court and Tribunals service fee remission system is designed for use in the civil courts and has been severely criticised in Is the 2007 Court Fee Remission System Working?[1].  The government response suggests that “comprehensive staff training” (paragraph 140 of response) has remedied the criticism in the civil courts but tribunal staff will be starting from scratch and delays and mistakes are inevitable.  The evidence required to prove an entitlement to a remission under Remission 3 (net disposable family monthly income) is extremely complex and onerous.  At least the government has abandoned its original suggestion that a claim would not be accepted without payment of a fee or a valid application for a remission, which could have resulted in claims being struck out as out of time.
6. There are also potential Equality Act and Human Rights Act implications to the proposals.  The original Equality Impact Assessment was lacking in substance.  Several respondents to the consultation pointed out that the remission system would not provide justification for the adverse impacts of the proposals on various “equality groups”, especially the disabled.  22% of those bringing ET claims and 40% of those bringing equality claims are disabled.  Charging fees will have a disproportionate effect on them.  Further, if they are in employment or applying for a job whilst in employment and suffer discrimination, they will probably not qualify for a remission because of their income.  Women seeking to enforce their maternity rights face similar problems.
7. In clause 7-9 of the Enterprise and Regulatory Reform Bill, the Government is proposing that every claimant should first refer their claim to ACAS to consider if pre-action conciliation might resolve the claim.  What incentive is there to an employer to consider this if they know that the employee will have to pay a minimum of £160 at a time when they may be both emotionally and financially vulnerable?  Surely they will wait to see the “colour of the employees money” before considering whether to settle a claim.  This is on the reasonable assumption that lots of employees will say it is not worth spending money on fees to bring a claim when the rewards are not large and the risks substantial.  And that is before you build in the costs of getting representation.
8. The government does not propose to refund fees once paid in the event of settlement.  This provides a further disincentive to settle and contrasts starkly with the civil courts where refunds, both full and partial, are available where a case settles.
9. Who ultimately pays the fees will be another matter to argue about in negotiations.  In my experience, the more factors there are to argue about, the less likely that a settlement will occur.  This will undermine one of the Government’s rationales for introducing fees, to reduce the number of hearings.
10. If a claimant has paid a hearing fee, which is non-refundable, they are more likely to want their day in tribunal.  Further, they are going to be more demanding of the service they expect from the tribunal.  No longer will tribunals be able to list more cases for hearing than they have Employment Judges so cases get adjourned the afternoon before or at the tribunal when the requisite number do not settle.
11. Conversely, if a claimant receives a full remission of fees they will be in a stronger position in negotiations with the employer than the employee who has to fund the fees.

1. The government seems to consider bringing a tribunal claim is more a life style choice than a matter of seeking to recover entitlements guaranteed by statute.  Employment laws are seen as an obstacle to taking on staff not a benefit to the economy.  But upholding individual employment rights which guarantee minimum fair employment conditions does not just a benefit the individual, it benefits society as a whole.  It was Winston Churchill who introduced one of the first pieces of legislation to provide for a minimum wage in the Trade Boards Act 1909.  This guaranteed a jointly agreed minimum wage in “sweated trades” originally covering some 200,000 workers.  He was concerned with fairness and unfair competition in markets with some employers having an unfair competitive advantage over others by not applying minimum standards fair terms.  He said “the good employer is undercut by the bad and the bad by the worst…”2  He feared a race to the bottom and the social upheaval that could follow.
2. Good employers with good standards of terms and conditions generally have better productivity, which is good for the economy. A culture of fear and low morale engendered by a hire and fire mentality does the opposite.  If an employer is able to hire and fire at will, in a recession with tough economic conditions, sacking employees is seen as a preferred option rather than consider agreeing cuts in hours or wages (or perish the thought, executive pay and conditions).  Dismissals lead to unemployment, and unemployed workers cannot afford to spend money, worsening the recession.  A motivated and secure workforce that knows it will be treated fairly and in accordance with the floor of statutory minimum employment rights will be more productive.  If workers cannot enforce the statutory minimum floor of rights then terms and conditions will be cut to compete with the bad and worst employer and the race to the bottom will continue. Tribunal fees in their current form will prevent employees enforcing their rights.  The statutory floor of minimum employment rights will become optional.  That is not good for employees but it is not good for society either.

Paul Statham