In what may be regarded as one of the most significant decisions in employment law in recent years, the Supreme Court ruled unanimously on 26 July 2017 that tribunal fees are unlawful. The Government responded to this decision by announcing that these fees would be abolished with immediate effect.

Stuart Chamberlain, employment law consultant, reports on the Supreme Court’s decision and assesses its implications for the Government and for employers.

The background

The fees for tribunals were introduced by the Coalition Government in 2013 under the Employment Tribunals and the Employment Appeal Tribunal Fees Order 2013. Their introduction meant that, with few exceptions, claimants to an employment tribunal had to pay a fee on presentation of a claim and a further hearing fee prior to the case being heard in the tribunal. The total cost for a claim for unfair dismissal, equal pay or discrimination was £1500, comprising a claim fee of £250 and a hearing fee of £950. There were also fees for appeals to the Employment Appeal Tribunal (EAT).

The introduction of tribunal fees had an immediate and startling impact: the number of claims made in the first year of their inception fell by some 70%, with a 95% fall in sex discrimination cases. There was widespread concern that the fee system had shut the doors of justice to those who did not have the financial resources to meet the fees.

The Supreme Court’s decision

The trade union UNISON unsuccessfully brought legal challenges to the fees at the High Court in 2013 and the Court of Appeal in 2015. The Supreme Court has overturned those judgments and ruled that the introduction of the fees was unlawful. The introduction of the fee regime was an unlawful exercise of the Lord Chancellor’s powers. The Supreme Court made its decision on three main grounds.

Access to justice

Access to justice is a constitutional right and inherent in the rule of law. If the fees denied such access then they were unlawful. The Supreme Court looked at the impact of the fees in the “real” world. It was easily proved that they denied access to justice by the dramatic and persistent fall in the number of employment tribunal claims. Further, the fees had been set at a level that was expensive for those on low and middle incomes. They could not afford the fees “without sacrificing ordinary and reasonable expenditure for substantial periods of time”. The fact that the level of the fees bore no correlation to the value of the claim acted as a deterrent to seeking redress at the tribunal.

Disproportionate impact

The Supreme Court said that the Lord Chancellor did have legitimate aims in introducing the tribunal fees (for example, in seeking to deter vexatious and malicious claimants and in making those who used the tribunal system contribute towards its running costs) but this regime was not a proportionate means of achieving these aims. EU law guarantees an effective remedy before a tribunal. The fees imposed disproportionate limitations on the enforcement of EU rights and were, therefore, unlawful under EU law.

Discriminatory

The Supreme Court also held that the fee regime was indirectly discriminatory against women because more women than men brought Type B claims (which include claims for discrimination under the Equality Act 2010), and which have the highest level of fee.

The Government’s response

The Government has made it clear that tribunal fees have been abolished with immediate effect. This includes new and pending claims. All fees between July 2013 and July 2017 now will have to be paid back by the Lord Chancellor’s department. Estimates of how much this will cost the Government (and the public) range between £27 million and £32 million.

This leaves open the position of those who, because of the cost of the fees, could not afford to bring a claim at the tribunal during this period. Will they be able to submit a claim now on the grounds that it was not “reasonably practicable” to do so from 2013 to 2017 because of the expense of an unlawful fee system?

The fees’ regime was declared unlawful by the Supreme Court. It has now to be replaced and in accordance with the proportionality set out by the Supreme Court. The Government may seek to introduce a more limited fees’ regime. This will not be easy as it is hard to see how it will have the parliamentary time (or a majority, as all other political parties are opposed to fees for tribunals) to introduce new legislation when the focus is on Brexit.

Nevertheless, new rules of procedure for tribunals and new claim forms, including an online system, will have to be introduced as quickly as possible to accommodate the changes necessitated by the Supreme Court’s judgment. Details are awaited.

The Scottish Government had already announced earlier in the year that it intended to abolish tribunal fees in Scotland.

And what does it mean for employers?

Employers may wish to consider the following points.

  • Some respondent employers will be looking for a recoup of the claimants’ fees that they had to pay when they lost their case at the tribunal between July 2013 and July 2017.

  • There will undoubtedly now be an increase in the number of claims to the employment tribunals although it remains to be seen how quickly the volume of claims returns to the pre-2013 level.

  • If tribunals do accept claims from individuals who could not bring a claim between July 2013 and July 2017 because of the expense, then employers could be faced with the possibility of new and unbudgeted costs if the case goes in the claimant’s favour and awards are made against them.

  • Employers could be faced with a return to a practice of the pre-2013 era: agreeing a financial settlement with the employee — even if they believed they had a strong case — rather than going through the time and expense in defending a claim in the tribunal, with its attendant adverse publicity.

  • Employers will no longer be able to rely on aggrieved employees not taking them to employment tribunals because of the cost. Rather, they will need to be more cautious in the way they deal with workplace disputes and more knowledgeable of their workers’ rights under employment law.

Last reviewed 8 August 2017