Business will feel pain of employment claims again

The Supreme Court's decision that employment tribunal fees were unlawful will have a profound effect on British businesses of all sizes.

Gavin Macgregor is an employment lawyer at Loch Employment Law

From July 2013, claimants have been required to pay fees up to £1,200 to have employment claims heard by an employment tribunal. Following a lengthy series of appeals by Unison, the union has succeeded in convincing the Supreme Court judges to rule that the fees regime could not continue in its present form.

The court noted that the Government initially had legitimate intentions to use fees to encourage earlier settlements, transfer the costs of the tribunal system to those using it and to eliminate vexatious claims which burdened the system. However, statistical evidence showed the volume of claims lodged had reduced by 66-70 per cent. Clearly, the effect of a costly fees regime meant some employees had been unlawfully prevented from accessing justice during the previous four years, despite a fee remission scheme being in place.

The court also determined that the imposition of fees was indirectly discriminatory. Figures showed a large reduction in the number of claims by women, for example. There was also clear evidence that fees were deterring genuine claims. In particular, claims for low levels of compensation were often rendered uneconomical to pursue.

So from 26 July 2017, claimants no longer require to pay lodging or hearing fees and the Government is beginning the process of reimbursing claimants who paid fees since 2013. The estimated cost to do this is £31 million.

The revoking of fees once again opens the door to litigation for employees who previously found the additional cost of lodging their claims prohibitive or financially pointless. Unison has also speculated that tribunals may reconsider some time-barred claims that were historically dismissed because fees were not paid. Employers could therefore face claims being lodged from dismissals that took place over three years ago.

It is likely to take several months before tribunals notice a dramatic impact in the volumes of cases they receive. However, an increase is inevitable with the absence of any financial deterrent to claimants. There is also concern about the capacity over the system to cope with the administrative burden of dealing with a sudden increase.

Since 2013, businesses have enjoyed the comfort provided by the fees regime in the knowledge that disgruntled staff will have to dip into their pocket to pursue a tribunal. Without that reassurance, employers can no longer afford to cut legal corners when managing contentious HR issues. It is likely therefore that the removal of fees will impact on negotiations and potentially a reduction in settlements if employees want their day in court, so to speak, without incurring fees in the lodging process.

The Supreme Court did not indicate that any sort of fee was unlawful. For example, it may be fairer to scale fees according to the level of compensation a claim may be worth.

The Government has not yet announced a plan to revise fees but it is reasonable to anticipate future proposals will be made to re-introduce a reduced fees regime, perhaps similar to the costs of small claims actions in the civil courts.

A rise in tribunal litigation does not ensure justice will be routinely served. There remains no guarantee that successful claimants will receive their awards even if they do succeed. The introduction of powers in April 2016 for tribunal enforcement officers to impose fines of up to £5,000 on employers who fail to pay on time appears to have been ineffective. There are renewed calls to name and shame employers who refuse to pay.

In a period of great uncertainty for British business, two things are certain: fees are gone for now, but tribunal claims are here to stay.

Gavin Macgregor is an employment lawyer at Loch Employment Law