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.”
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 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: