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Employment tribunal fees are unlawful

The Supreme Court (SC) has ruled in the case of R (on the application of UNISON) v Lord Chancellor [2017] that the Employment Tribunal fees system, which was introduced under the Fees Order in 2013 by the Lord Chancellor, is unlawful and will be quashed with immediate effect.

From today, fees will no longer be charged in the Employment Tribunal (ET) or the Employment Appeal Tribunal (EAT). This is likely to lead to a sharp increase in the number of employment claims which are lodged.

Immediate Implications

As of today, fees can no longer be charged in the ET or the EAT and the government has pledged that fees which have been paid since the introduction of the Fees Order will be reimbursed. The government’s ET fees review published in January showed that £27m was collected in fees from 2012-16.

Not only does this mean that claimants will be entitled to recover their fees, but in cases where claims were successful at ET and the employer reimbursed the claimant’s fee, the employer should be able to recover those costs.

There is some uncertainty about where this leaves claimants whose claims were rejected for failure to pay the fee, or those potential claimants who had cause for complaint but were dissuaded from bringing claims because of the fees. It is feasible that we might see a small number of historic claims being lodged, with an application to extend the time limit for service on the basis of this Judgment. However, there may be a good argument to counter such an application where delay, which could in some cases be significant, puts in jeopardy the possibility of a fair hearing.

The Fee Regime and Earlier Challenges

The fees range from £390 for Type A claims (including unpaid wages, redundancy pay and breach of contract) to £1,200 for Type B claims (such as unfair dismissal, equal pay, discrimination and whistleblowing). 

Unison brought Judicial Review proceedings against the Lord Chancellor in respect of the Fees Order.  In the lower courts this was on the basis that the Fees Order breached the EU principles of effectiveness and equivalence and was indirectly discriminatory. Those arguments failed. Before the SC the case was argued primarily on the basis of the common law right of access to justice, and the panel of seven Judges agreed with UNISON, finding that the fee regime is unlawful.

Today's Judgment

The SC Judgment focuses on the rule of law and the importance of access to justice for all. Lord Reed, who gave the lead Judgment, noted that:

“Courts exist in order to ensure that the laws made by Parliament, and the common law created by the courts themselves, are applied and enforced…. In order for the courts to perform that role, people must in principle have unimpeded access to them.”

In assessing the impact of ET fees on access to justice, the SC compared the figures preceding the introduction of fees with more recent periods, noting that there has been a long-term reduction in claims accepted by ETs in the order of 66-70%. The SC heard that many low end claims were not being brought because the value of the fee equalled the money the worker was owed – it simply was not worth workers bringing such claims.

The SC concluded that the principle reason for the significant fall in the number of ET claims is lack of affordability. Whilst there is a remission scheme in place, Lord Reed considered that it was not effective as it only applied in exceptional cases. He found that where households on low to middle incomes can only afford fees by sacrificing the ordinary and reasonable expenditure required to maintain what would generally be regarded as an acceptable standard of living, the fees cannot be regarded as affordable.

Whilst the reasons which underlay the Fees Order were legitimate, in order for the fees to be lawful they have to be set at a level that everyone can afford. The evidence before the SC was that the fees were such that there is a real risk that persons will effectively be prevented from having access to justice. Therefore, the Fees Order was unlawful under both domestic and EU law and was quashed.

In respect of the arguments made about the Fees Order being discriminatory, the parties accepted that the Fees Order had a disparate impact on women and Lady Hale held that this treatment could not be objectively justified. The application of fees is therefore unlawful discrimination.

Looking to the Future - Expect an increase in employment claims

Of note, the SC did make clear that the principles behind the introduction of fees were legitimate. Therefore, the government may now seek to introduce a new fee scheme, which is more affordable. However, with Brexit as its main priority and a significant piece of work now required to deal with the immediate aftermath of the Judgment, we do not expect to see any developments in this area for some time. What seems beyond doubt is that employers will see some increase in employment claims with immediate effect.

If you would like more information about this matter please contact Victoria Watson, Jacqui Atkinson or Ron Simms.

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