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UK employers at risk after tribunal fees quashed

01 August 2017 by Jimmy Nicholls

UK employers at risk after tribunal fees quashed - read more

A Supreme Court judgment increases the pressure on businesses and the legal system.

A British court ruling against employment tribunal fees has raised fears that businesses, mediators and the courts could face a greater burden of cases irrespective of their employment practices.

The Supreme Court decided in July that the fee scheme introduced in 2013 by the government ‘prevents access to justice, and is therefore unlawful’ and is also ‘indirectly discriminatory’ against women.

Although the decision has been widely welcomed as in the public interest, observers warn that by making it easier for employees to bring claims more pressure will be put on businesses and the legal system.

‘The overarching point is this is a bad outcome for business because it means there is one less hurdle standing in the way of employees bringing claims,’ Joe Aiston, a senior associate specialising in employment at law firm Taylor Wessing, told Governance and Compliance.

‘Obviously you would expect business to have their employee procedures in good shape, but it is more important than ever now.’

Peter Swabey, policy and research director at ICSA, said: ‘This is undoubtedly a good decision from the viewpoint of workers’ rights, but it is important to balance access to justice against the cost to business of defending against frivolous claims.’

“It is important to balance access to justice against the cost to business of defending against frivolous claims”

The fees were put in place with the aim of placing more costs on users of tribunals, incentivising earlier settlements, and discouraging weak claims.

These fees applied for presenting a claim and as part of the hearing process, ranging from £360 to £1,200 for individuals, and between £780 and £7,200 for groups. A further £1,600 was charged for appeals.

Government counsel was ‘unable to explain’ how the fees had been set, according to the Supreme Court judgment, which argued that since there was no relationship between the size of monetary awards sought and fees the system was likely to deter small and non-financial claims.

Ministry of Justice data cited by the court show that claims accepted by employment tribunals for consideration fell by between 66% and 70% after fees were introduced, though some of this decline was attributed to an improved economy.

Though an exemption from fees existed for exceptionally poor claimants, this was described by the Supreme Court as ‘of very restricted scope’.

Samantha Murray-Hinde, employment partner at law firm Howard Kennedy, said: ‘It is inevitable that the number of claims will go up as there is now no financial disincentive to bringing a claim and an employee has little to lose.

‘Even where a claim is unmeritorious, obtaining costs in the tribunal is seen as the exception rather than the rule and so an employer has limited recourse.’

Boosted caseload

Murray-Hinde added that employees who were previously deterred from bringing claims due to the fees might now argue that it had not practical for them to do so within legal time limits and that a time extension would be warranted for their claim.

‘Disputes that the employer thought had been concluded could be resurrected as a result,’ she said. ‘This does not necessarily mean that rulings against employers will increase, however.’

Aiston disagreed on this point. ‘It is obviously the case that there will be more successful claims,’ he said.

‘But also there will be more claims that are nuisance claims which have perhaps little value or merit and yet result in significant cost to employers.’

Analysis from the Ministry of Justice released in January had previously shown that the proportion of successful cases being brought before the tribunal is lower than before fees were introduced.

“It is obviously the case that there will be more successful claims”

Mitigating tribunal risk

While Murray-Hinde of Howard Kennedy advises companies to evaluate their employment policies in light of the decision, others believe that the impact to well-managed firms might be muted.

‘I do not think employers have to do anything different provided they are complying with their procedures and policies,’ said Paul McFarlane, a partner specialising in employment at Weightmans.

‘The ruling is not going to impact adversely on an employer that complies with procedures and policies, because if they get a claim they can defend it.’

Rachel Suff, employment relations adviser at the Chartered Institute of Personnel and Development (CIPD), a professional association, said that good management policies could also reduce the risk of conflict going before a tribunal.

‘The ideal approach advocated by the CIPD – regardless of fees – is to promote the use of informal conflict resolution methods like mediation, to help nip potential conflict in the bud,’ she said.

‘If a case does proceed to tribunal, relationships are likely to have broken down beyond repair so it is essential that organisations have in place good people management policies and practices, and nurture healthy  working relationships.’

Acas and court impact

Observers are also concerned about the ruling’s effect on the court system and the conciliation service Acas, which provides mandatory mediation before a claim is presented to the employment tribunals, and can also be involved later in the process.

Taylor Wessing’s Aiston said: ‘The conciliation process was only brought in a couple of years ago and they’re already struggling to deal with the number of conciliations effectively.

‘The fact there are no fees will mean an increase in the number of people speaking to Acas. It may result in a reduction in the quality of service Acas can give.’

Responding to questions of mounting pressure, an Acas spokesperson told Governance and Compliance: ‘We note the decision of the Supreme Court and will assess any impact on our conciliation services. Court system reforms and tribunal fees are the responsibility of the Ministry of Justice.’

Tim Goodwin, employment associate at Winckworth Sherwood, also said he doubted that Acas would become much more burdened as a result of the ruling, despite warning that the body ‘is already badly overstretched and underfunded’.

‘The Acas Early Conciliation process takes place before any fee was payable, so was effectively free – so it seems unlikely that would-be claimants were deterred from participating in that part of the process,’ he said.

“The conciliation process was only brought in a few years ago and they’re already struggling to deal with the number of conciliations effectively”

Following the decision, the UK government agreed to refund those who had already paid fees when using the employment tribunals, a cost of £32 million.

Dominic Raab, the justice minister, said in a statement that the government wanted to find a balancing between access to justice, deterring spurious claims and funding tribunals.

Aiston described the costs to the court system as ‘massive’.

‘We do not know how the taxpayer is going to pay for all that,’ he said. ‘They are going to have to do something to help Acas deal with the claims. The decision is a negative one from a taxpayer perspective.’

Unions could also be facing changes to their costs in fighting these cases, with some having paid the employment tribunal fees on behalf of their members, and used this perk as a recruiting tool.

‘If there are more claims then that might have an impact on unions’ resources in terms of how they defend those claims,’ said Weightmans’ McFarlane.

He added that the news was good for Unison, the trade union that pursued the claim against the government, but that the impact on other unions was unclear.

However, Murray-Hinde said: ‘I consider this will serve to enhance the union's role in the workplace. 

‘Good industrial relations have always been vital for any business, but with tribunals now more accessible, employers would be well-advised to work more closely with unions when dealing with contentious issues.’

Jimmy Nicholls is deputy editor of Governance and Compliance

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