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Thorny issues arising from the abolition of Employment Tribunal fees

04 August 2017

The Supreme Court ruled last week that Employment Tribunal (“ET”) fees are unlawful. The case has significant constitutional and political implications, but also raises a number of thorny practical issues. We explore some of these issues here and will provide further updates as matters develop.

Volume of future claims

The introduction of fees in July 2013 led to a dramatic and persistent fall in the number of claims of up to 70%. Their quashing by the Supreme Court might therefore lead to an equally dramatic increase in the number of claims.

This is particularly the case while access to the ET remains free.  Although the Government may introduce a new fees regime (see below), at the moment there is a window of opportunity during which ET claims can be brought without any fee at all. This means employers are likely to face an increased number of ET claims in the coming months, especially the lower-value claims that employees may have previously been deterred from bringing.

Such an increase in claims is likely to place Acas - the Advisory, Conciliation and Arbitration Service - under great strain in undertaking mandatory early conciliation. This procedure was only brought in after the introduction of fees, and requires all potential claimants to contact Acas before bringing an ET claim.

A rise in claims would also significantly increase pressure on the already strained ET system, which has had major cuts in funding in light of the drop in claims and general public sector austerity measures. This is likely to cause frustrating delays for users of the ET, but may add urgency to the Government’s ongoing scrutiny of how to improve the efficiency of the court and tribunal system.

ET administrative processes

The abolition of fees necessitates amendments to ET documents and processes. HM Courts & Tribunals Service has already begun looking at the issue, and has admitted that it will lead to some delays in processing claims currently being initiated.

As of 3 August 2017, the form that can be used to submit claims online has been amended to remove any reference to fees.  However, the downloadable PDF form that is available online, for posting or hand delivery to the ET, continues to include a section on fees. Although the separate guidance on making a claim states, “You do not have to pay a fee to make a claim to the Employment Tribunal, even if it says so on the form”, this is a confusing situation for potential claimants.

Refunds of historic fees

Following the Supreme Court’s judgment, the Government immediately stated that it will refund fees paid by claimants in the past and will announce details of its scheme in due course. This scheme will need to address some potentially tricky problems.

There is likely to be a central record of all fees paid by ET claimants, but it is not as simple as just repaying those fees to those claimants. Where a claimant won their case, in most situations the losing employer would be ordered to pay the value of the ET fees to the claimant as part of a costs award. If all fees are simply paid back to claimants, there will be double recovery in situations where the employer has already been ordered to make that payment. However, the ET cannot simply check its records and refund those fees to the employer instead, as many employers do not actually pay the amounts ordered. It looks likely that any fair refunds system will need to have a mechanism for obtaining information from both parties in order to assess where a refund is due.

There is also a question about what should happen if an employer reflected a fee that had already been paid in an amount paid under a settlement agreement. If that fee will now be refunded by the ET, can the settlement agreement be reopened? Usually such settlements are both final and confidential, and it is unlikely that there would be any wording in the agreement that would allow the employer to reclaim the amount paid.

The Employment Tribunals Rules of Procedure 2013 also contain rules related to fees and will need to be amended by legislation. In the meantime, they will need to be read in line with the Supreme Court’s judgment.

Out of time claims

The Supreme Court found that the fall in claims was most likely caused by the introduction of an unlawful fees regime. Employees who would have brought a claim, but who were deterred by the need to pay a fee, might now seek to bring claims out of time. They might reasonably argue that the unlawful fees regime meant that they could not bring their claim due to the financial hardship it would have caused them.

Whether ETs will be prepared to allow this will depend on the type of claim and the claimant’s particular circumstances. With an unfair dismissal claim, the issue would be whether it was “not reasonably practicable” to bring a claim within the time limit on account of the fees regime, which is generally a strict test. In contrast, in a discrimination case, the test would be more flexible - whether it is now “just and equitable” to extend time to bring the claim.

Existing claimants may also seek to amend or reinstate parts of claims to cover matters not otherwise being pursued only on account of the higher fees that were payable. Some claimants may also have withdrawn their claims before a hearing due to the higher level of fee payable at that stage (for unfair dismissal, the issue fee was only £250 but the fee for a hearing was £950). Again, those claimants may try to reopen the case on the basis that they only withdrew due to an unlawful fees system.

There is likely to be a large volume of litigation over these issues, involving not only employers but also possibly the Government for losses caused by its unlawful policy. Bringing a claim directly against the Government might be the only practical option for some individuals if, for example, their former employer has now been liquidated but was solvent when a claim could originally have been brought.

Future fee and related arrangements

While the Supreme Court ruled the fee structure introduced in 2013 was unlawful, it did not rule out the possibility of the Government devising a lawful structure. Indeed, Lady Hale’s judgment on the discriminatory effect of fees expressly notes that, “the Lord Chancellor will no doubt wish to avoid any potentially unlawful discrimination in any replacement Order”! The current political environment might, however, make the reintroduction of fees challenging. Depending on future caseloads, the Government might consider amending the deposit order or costs order regimes as an alternative way to seek to achieve its legitimate policy objective of discouraging unmerited claims.

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