News

26th July, 2017

Supreme Court: Employment Tribunal Fees are Unlawful

By Tom Gilbart

This morning, the Supreme Court ruled unanimously that employment tribunal fees are unlawful because they had the effect of preventing access to justice. Claimants before the employment tribunal will no longer have to pay a fee and the Ministry of Justice has undertaken to refund those who have already paid.

The rules – introduced in July 2013 – meant that those bringing an employment tribunal claim had to bring a fee – with a fee of £1200 required to bring a claim of discrimination in the tribunal. The government argued that the fees would transfer the cost of tribunals from taxpayers to tribunal users; deter unmeritorious claims and encourage earlier settlement.

However, the fees were the subject of strong criticism. Trade Unions; lawyers and (some) politicians argued that the fees amounted to an impediment to achieving justice.

The union Unison – who brought the case – argued that the rules restricted access to justice in a tribunal system which is designed for processing small claims. They also argued that the rules disproportionately affected women.

The unanimous view of the Supreme Court was that “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”

Lord Reed gave the lead judgment of the Court. It must be read in full and it contains some important observations on access to justice and the rule of law. It is one of the most significant employment law decisions for many years.

The effect of the fees

“Although there are differences between the figures given in the different sources, the general picture is plain. Since the Fees Order came into force on 29 July 2013 there has been a dramatic and persistent fall in the number of claims brought in ETs. Comparing the figures preceding the introduction of fees with more recent periods, there has been a long-term reduction in claims accepted by ETs of the order of 66-70%” (Para 39)

“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…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” (Para 91)

The affordability of the fees

The Ministry of Justice had previously argued that they refused to accept that people “cannot realistically afford to pay” and that affording the fees “meant reducing some other areas of non-essential spending in order to save the money”. In the view of the Ministry of Justice, this “non-essential spending” included “clothing” and “social and cultural participation”

The Supreme Court viewed the question of affordability in the “real world”:

“The question whether fees effectively prevent access to justice must be decided according to the likely impact of the fees on behaviour in the real world. Fees must therefore be affordable not in a theoretical sense, but in the sense that they can reasonably be afforded. 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… the fundamental problem (with the Lord Chancellor’s argument) is the assumption that the right of access to courts and tribunals can lawfully be made subject to impositions which low to middle income households can only meet by sacrificing ordinary and reasonable expenditure for substantial periods of time” (Paras 93 and 95) 

Whether the fees deterred unmeritorious claims

“A secondary objective of the introduction of fees was to deter the bringing of unmeritorious claims…the proportion of successful claims has been consistently lower since fees were introduced, while the proportion of unsuccessful claims has been consistently higher. The tribunal statistics, which record the figures for all claims, show the same trend. The Lord Chancellor accepts that there is no basis for concluding that only stronger cases are being litigated” (Para 57)

Whether the fees encouraged settlement

“It appears that the proportion of cases settled through Acas has slightly decreased since fees were introduced. That is consistent with the view of commentators, noted in the Review Report, that some employers were delaying negotiations to see whether the claimant would be prepared to pay the fee” (Para 59)

Access to justice and the Rule of Law

“The constitutional right of access to the courts is inherent in the rule of law. The importance of the rule of law is not always understood. Indications of a lack of understanding include the assumption that the administration of justice is merely a public service like any other, that courts and tribunals are providers of services to the “users” who appear before them, and that the provision of those services is of value only to the users themselves and to those who are remunerated for their participation in the proceedings” (para 66)

“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. That role includes ensuring that the executive branch of government carries out its functions in accordance with the law. In order for the courts to perform that role, people must in principle have unimpeded access to them. Without such access, laws are liable to become a dead letter, the work done by Parliament may be rendered nugatory, and the democratic election of Members of Parliament may become a meaningless charade. That is why the courts do not merely provide a public service like any other” (Para 68)

“The written case lodged on behalf of the Lord Chancellor in this appeal itself cites over 60 cases, each of which bears the name of the individual involved, and each of which is relied on as establishing a legal proposition. The Lord Chancellor’s own use of these materials refutes the idea that taxpayers derive no benefit from the cases brought by other people” (Para 70)

EU Law

European law places an emphasis on “the protection of rights which are not theoretical and illusory, but practical and effective…. limitations must pursue a legitimate aim and there must be a reasonable relationship of proportionality between the means employed and the legitimate aim sought to be achieved… Ultimately, the question is whether the limitation of the right to an effective remedy resulting from the Fees Order respects the essence of that right and is a proportionate means of achieving the legitimate aims pursued, or has led to an excessive burden being placed on individuals who seek to enforce their rights. 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.” (Para 109 - 117).

Conclusion

The Court held that “the Fees Order is unlawful under both domestic and EU law because it has the effect of preventing access to justice. Since it had that effect as soon as it was made, it was therefore unlawful ab initio, and must be quashed” (Para 119)

Discrimination

Lady Hale gave judgment on the discrimination issue. She found that:

-       The Fees Order was indirectly discriminatory under the Equality Act 2010 because the higher fees for type B claims put women at a particular disadvantage - because a higher proportion of women bring type B than bring type A claims.

-       The charging of higher fees was not a proportionate means of achieving the stated aims of the Fees Order. It had not been shown to be more effective at transferring the cost of the service from taxpayers to users, and in some type B cases (such as pregnancy dismissal) the higher fee did not correspond to a greater workload placed on the tribunal.

-       Meritorious as well as unmeritorious claims might be deterred by the higher price, and there was no correlation between the higher fee and the merits of the case or incentives to settle

The Supreme Court’s decision is the latest in a long line of failures by the government to justify their law and order reforms. The employment tribunal fees were one of a number of initiatives introduced by Chris Grayling which have subsequently fallen apart under challenge in the courts.

This is a significant decision and one which will have a significant impact upon employees; employers and the tribunal system.

The Ministry of Justice has already recognised that scale of their loss before the Supreme Court. Justice Minister Dominic Raab announced that “we will take immediate steps to stop charging fees in employment tribunals and put in place arrangements to refund those who have paid”.

Paul Gilroy QC, Head of the 9 St John Street Employment Group, said “We are heading into what is going to be a very interesting time for the Employment Tribunals, with a recruitment freeze on Employment Judges, retiring EJ's not being replaced, and Tribunal staff facing a potential deluge in claims whilst having to sift through £23m worth of claims for reimbursement of fees. The government might seek to introduce a new fees system, but given the current political climate, that prospect seems pretty unlikely, so the judgment of the Supreme Court is likely to have a major and long lasting impact on Tribunal litigation”.



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