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Employment Tribunal Fees Regime Declared Unlawful

Nicholas Siddall analyses the reasoning of the Supreme Court decision handed down today.

Prior to today’s decision of the Supreme Court the score read Her Majesty’s Government 2: UNISON 0 in the efforts of the union to overturn the Employment Tribunal fees regime which has been in place since July 2013.

Following the judgment of the Supreme Court the position is now resolved in favour of UNISON with it securing a 7-0 victory (in terms the Supreme Court Justices). The effect of the same is that the Employment Tribunal fees regime has been declared unlawful and the Government is thus obliged to repay all fees that it has collected since 2013.

Lord Reed’s Judgment

The lead judgment was given by Lord Reed with whom Lord Neuberger, Lord Mance, Lord Kerr, Lord

Wilson and Lord Hughes agreed. In a judgment clearly driven by concerns of social policy he made the following observations.

“6. Relationships between employers and employees are generally characterised by an imbalance of economic power. Recognising the vulnerability of employees to exploitation, discrimination,   and   other  undesirable   practices,   and   the   social problems which can result, Parliament has long intervened in those relationships so as  to  confer  statutory  rights  on  employees,  rather  than  leaving  their  rights  to  be determined by freedom of contract. In more recent times, further measures have also been  adopted  under  legislation  giving  effect  to  EU  law.  In  order  for  the  rights conferred  on employees  to  be  effective,  and  to  achieve  the  social  benefits  which Parliament intended, they must be enforceable in practice.”

Lord Reed also observed as to the disparity between the fees regime in the County Court and the Employment Tribunal (see paragraph 20) and the fact that a family earning the national minimum wage would only qualify for partial fee remission under the current regime (paragraph 24). He returned to this point at paragraphs 51-5 addressing the fact that a number of hypothetical Claimants would be unable to meet basic standards of living if they were asked to pay fees in circumstances where they did not qualify for remission.

When addressing the ability of a successful Claimant to recover fees from the employer he observed as follows:

“28. Although it is therefore possible to recover fees in the event that a claim is successful, it is necessary to bear in mind that it is generally difficult to predict with confidence that a claim will succeed. That is so for a number of reasons. One is that estimating   prospects   of   success   is   not   an   exact   science,   especially   before proceedings  have  been  initiated.  Depending  on  the nature  of  the  case,  initial estimates  can  often  change  during  the  course  of  proceedings as new  information comes to light. In that regard, it is relevant to note that the pre-claim questionnaire

procedure, under which an employer could be required to provide an explanation for a difference in treatment in advance of a claim being issued, was abolished in 2013. Secondly, a reliable estimate depends on legal judgment and experience, which may not  be  available  to  an  employee  contemplating  bringing  a  claim  in  an  ET: employment  disputes  generally  fall  outside  the  scope  of  legal  aid.  Thirdly, employment  law  is  characterised  by  a  relatively  high  level  of  complexity  and technicality. It is also important to bear in mind that, even if an order is made for the reimbursement  of  fees,  there  is  a  significant  possibility  that  the  order  will  not  be obeyed. This will be discussed shortly.”

He made the point at paragraph 29 that access to justice involves the right to bring a claim and have it heard and that a lack of success in the same does not lead to the conclusion that the claim ought never to have been brought.

A point which seemed to weigh heavily with the court was the obvious effect that the introduction of the fees regime had had on the number of claims brought. He described “there has been a dramatic and persistent fall in the number of claims brought in ETs.” (paragraph 39) and that the effect had been particularly marked in low value claims (paragraph 42). It may have been significant in the court’s reasoning that at paragraph 57 the Government conceded that there was no evidence supporting a view that the effect of fees had been to encourage only the bringing of stronger claims.

Lord Reed’s judgment essentially allowed the appeal on the following grounds:

The Rule of Law

He considered that the effect of the fees regime was improperly to limit access to the Employment Tribunals and undermine the rule of law (see paragraph 66-85). His essential conclusion was as follows:

“91. In order for the fees to be lawful, they have to be set at a level that everyone can  afford,  taking  into  account  the  availability  of  full  or  partial  remission.  The evidence now before the court, considered realistically and as a whole, leads to the conclusion that that requirement is not met. In the first place, as the Review Report concludes, “it is clear that there has been a sharp, substantial and sustained fall in the volume of case receipts as a result of the introduction of fees”. While the Review Report fairly states that there is no conclusive evidence that the fees have prevented people from bringing claims, the court does not require conclusive evidence: as the Hillingdon case indicates, it is sufficient in this context if a real risk is demonstrated. The fall in the number of claims has in any event been so sharp, so substantial, and so sustained as to warrant the conclusion that a significant number of people who would otherwise have brought claims have found the fees to be unaffordable.”


96. Furthermore, it is not only where fees are unaffordable that they can prevent access to justice. They can equally have that effect if they render it futile or irrational to bring a claim. As explained earlier, many claims which can be brought in ETs do not seek any financial  award:  for  example,  claims  to  enforce  the  right  to  regular work breaks or to written particulars of employment. Many claims which do seek a financial award are for modest amounts, as explained earlier. If, for example, fees of £390 have to be paid in order to pursue a claim worth £500 (such as the median award in claims for unlawful deductions from wages), no sensible person will pursue the claim unless he can be virtually certain that he will succeed in his claim, that the award will include the reimbursement of the fees, and that the award will be satisfied in full. If those conditions are not met, the fee will in reality prevent the claim from being pursued, whether or not it can be afforded. In practice, however, success can rarely be guaranteed. In addition, on the evidence before the court, only half of the claimants who succeed in obtaining an award receive payment in full, and around a

third of them receive nothing at all.”

Can the Fees Regime be Justified in Terms of its Effect on the Right to Seek Justice?

As a result of the findings above Lord Reed dealt with this point briefly and stated that it could not. However the comments that he made are potentially relevant should the Government seek to go back to the drawing board and put in place a fresh fees regime.

100.   However, it is elementary  economics,  and  plain  common  sense,  that  the revenue derived from  the  supply  of  services  is  not  maximised  by  maximising  the price. In order to obtain the maximum revenue, it is necessary to identify the optimal price, which depends on the price elasticity of demand. In the present case, it is clear that  the  fees  were  not  set  at  the  optimal  price:  the  price  elasticity  of  demand  was greatly underestimated.  It has  not  been  shown  that  less  onerous  fees,  or  a  more generous system  of  remission,  would  have  been  any  less  effective  in  meeting  the objective of transferring the cost burden to users.”

“101  Nor, on the evidence before the court, have fees at the level set in the Fees Order been shown to be necessary in order to achieve its secondary aims: namely, to incentivise earlier settlements and  to  disincentivise  the  pursuit  of  weak  or vexatious claims. These issues were discussed at paras 57-59 above.”

Does the Regime Cut Down Statutory Rights?

Again Lord Reed addressed this point briefly. Stating this was a further ground of unlawfulness.

“104. In the circumstances of the present case, this ground of appeal does not add anything to the ground based on the common law right of access to justice. In so far as the Fees Order has the practical effect of making it unaffordable for persons to exercise rights conferred on  them  by Parliament,  or  of  rendering  the  bringing  of claims to enforce such rights a futile or irrational exercise,  it  must  be regarded  as rendering those rights nugatory.”

EU Law

Relying on his analysis of the Common Law right of access to justice Lord Reed agreed that this was a further reason why the fees regime was unlawful.

“117. Given the conclusion that the fees imposed by the Fees Order are in practice unaffordable by some people, and that they are so high as in practice to prevent even people  who  can  afford  them  from  pursuing  claims  for  small  amounts  and  non-monetary claims, it follows that the Fees Order imposes limitations on the exercise of EU rights which are disproportionate, and that it is therefore unlawful under EU law.”

Lady Hale’s Judgment

Lady Hale delivered a short concurring judgment making plain that she agreed with all of the points made by Lord Reed. Her express purpose was to address the issue of discrimination should the Government wish to consider a replacement fees regime.

Her judgment addressed the argument that the Type B claims fee level disproportionately affected the ability to bring claims of discrimination. In a clear warning to the Government she made the following observations:

“129.    In this connection, it may be relevant to consider several factors. Even if there is a  correlation  between  the  type  of  claim  and  the  cost  to  the  tribunal,  there  is  no correlation between the higher fee charged for Type B claims and the merits of the case or  the  conduct  of  the  proceedings  by  the  claimant  or  the  incentives  to  good litigation  and  settlement  behaviour  on  each  side.  A  Type  B claimant  with  a  good case  is  just  as  likely  to  be  deterred  from  bringing  it  by  the  higher  fee  as is  the claimant  with  a  bad  case.  The  case  may  have  been  conducted  as  efficiently  as  it possibly could be by the claimant. Alternatively, the respondent or the tribunal itself may be  responsible  for  the  length  and  cost  of  the proceedings.  The  fees  may incentivise  the  claimant  to  settle  but  they  may  have  the  reverse  effect  upon  the respondent, who may calculate that the claimant will be deterred from carrying on and  thus  refuse  to  settle  when  he  should.  In  the  great  majority  of  cases,  the respondent is already in much the more powerful position and the higher fees simply exacerbate that.

“130 It has simply not been shown that the higher fee charged for Type B claims is more effective in transferring the cost of the service from taxpayers to users. As Lord Reed has explained (para 100, above), the revenue derived from the supply of services is not  maximised  by  maximising  the  price.  Revenue  is  maximised  by charging the right price, the price which potential claimants will see as constituting reasonable value for money. It might be thought, therefore, that the higher the price, the greater the deterrent effect. However, the evidence suggests that there has a greater fall in Type A than in Type B claims (para 40, above). Nevertheless, there has been a dramatic fall in both types of claim, which suggests that neither has been priced correctly to maximise revenue.

“131 Hence, these factors combine to the conclusion that charging higher fees for Type B claims  has not  been  shown  to  be  a proportionate  means  of  achieving the stated aims of the fees regime.”

The Effect

The overall effect of the judgment is that the current fees regime has been declared unlawful. However what the judgment does not provide is that a fees regime per se is unlawful. Thus it appears likely that the Government may seek to recraft a new regime to take into account the points made by the Court. If that is the decision which is eventually taken two obvious predictions from the judgment appear to be that:

  • The overall level of fees shall be much reduced; and
  • A differential charging structure on the basis of the type of claim is unlikely to be lawful.

Read Antony Sendall‘s news report on the judgment HERE.

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