Introduction of tribunal fees could be a costly business
Author: Darren Newman
The Government intends to introduce fees for claimants bringing tribunal claims. But which claimants would they end up deterring, and do the staff in the employment tribunal system have the resources to deal with the introduction of fees? Consultant editor Darren Newman sets out his views.
Employment law could see some serious changes over the next couple of years. On top of the "red tape challenge", the Government is conducting a fundamental review of employment law and has published a very wide ranging discussion paper, Flexible, effective, fair: promoting economic growth through a strong and efficient labour market (PDF format, 172K) (on the BIS website). This invites views about just what the "fundamental employment protections" should be, suggesting that the whole future of employment law is on the table.
There have also been some more specific proposals. We are awaiting the Government's formal response to Resolving workplace disputes: a consultation (PDF format, 528K) (on the BIS website) on reforming the employment tribunal system. However, following the Chancellor, George Osborne's, speech to the Conservative Party Conference, we now know more about what the Government is thinking.
First, the Government has decided to increase the qualifying period for unfair dismissal from one year to two years. It appears that this change will take effect from April 2012. No primary legislation is needed to make the change - just an order from the appropriate minister - so we can be confident that the change will happen as scheduled.
This is just what we expected. The employer lobby was very much taking it for granted that the qualifying period would be increased and, if the decision had gone the other way, this would, no doubt, have resulted in a huge row. The Government claims that the purpose of this measure is to encourage employers to take on more staff. I have made it clear before that I am not impressed by that argument (see Increasing the unfair dismissal qualification period), but it is, at least, a straightforward change.
However, the same cannot be said about the other measure announced by the Chancellor: the introduction of fees for claimants bringing employment tribunal claims. Of course, this proposal does not come out of the blue. In fact, the Chancellor has told us nothing that we did not already know from a careful reading of the "Resolving workplace disputes" consultation. The consultation clearly stated that the Government intended to introduce fees, and indicated that it would consult on the detail. No formal consultation has yet been launched, although it is clear that there have been lots of talks "behind the scenes" about what the level of the fee should be.
As a result, press stories coming out at the same time as the Chancellor's speech suggested that the initial fee would be £250 for an employment tribunal claim, with a larger sum payable where more than £30,000 in compensation was being claimed. There would also be a hearing fee of £1,000 if the case went as far as a full hearing.
We must remember that these are just press stories, not policy announcements, although they clearly reflect the Government's current thinking. Nevertheless, they have not been subject to proper consultation and it strikes me as inconceivable that this fee structure would actually be imposed across the board. The fees being talked about are well above the fees charged in the small claims court, and are set at roughly the same level as county court fees where the claimant is seeking an award of between £5,000 and £15,000.
However, many employment tribunal claims are actually for very small sums of money. For example, an employee may not have been paid his or her notice pay, and may be seeking a payment of, say, £1,500. This can be claimed either in the employment tribunal or in the county court. Similarly an unlawful deductions from wages claim for the same amount could usually also be brought as a breach of contract claim in the county court rather than as an employment tribunal claim. In either case, the initial county court fee would be £80 and the hearing fee would be £110. It would be simply ludicrous for the Government to introduce a fee system that was more onerous than the one applying to equivalent county court claims. It would make a mockery of the whole employment tribunal system, which is supposed to be cheaper, quicker and more informal than using the normal civil courts.
I therefore expect the proposals to change significantly once a proper consultation has been conducted. Nevertheless, it does seem clear that the Government is not thinking of introducing mere "token" fees. Individuals with a substantive claim that could lead to a considerable amount in compensation will have to stump up a significant fee first.
The exception is where they are unemployed. Again, reports suggest that "poor" individuals or those on income support will not have to pay the fees. That makes a big difference in the employment tribunal system, because one characteristic of tribunal claimants is that they have often lost their job quite recently. I would be interested to see the Government's prediction about the proportion of litigants who would actually be required to pay a fee.
Much of the justification for introducing a fee system is that it will deter "vexatious" litigants. However, this makes very little sense to me. Genuinely vexatious litigants - and there are fewer of them than is often claimed - are not usually making a calculated risk that they may as well bring their vexatious claim because they have no fees or costs to pay. In my experience, they strongly feel that they have been treated unlawfully and that they should receive a large amount of compensation. They genuinely expect to win: indeed their unrealistic expectations of the compensation they will receive may prompt them to find the money somehow, no matter how large the fee is.
The claimants who will be deterred are the rational ones who have a strong argument, but no guarantee of success. Discrimination cases in particular can be hard to predict in terms of outcome, because so much turns on the inferences that a tribunal is prepared to draw from a disparate range of facts. It is the borderline cases - not the vexatious ones - that will be deterred by this measure.
Of course, the Chancellor has made it clear that the fee will be refunded if the claim is successful. But why should it? In the county court, the fee is recoverable from the losing party and is simply added to the compensation being claimed. The same principle could apply in the employment tribunal. That would surely be fair because an employer that chooses to fight a losing claim is as responsible for the public expense of a tribunal as a claimant who launches one.
The "Resolving workplace disputes" consultation suggested that employers should have a financial penalty imposed on them of up to £5,000 if they are found by a tribunal to have breached employment rights. That proposal did not go down well with employers and, perhaps unsurprisingly, Osborne made no reference to it in his conference speech. We will have to see the Government's formal response to the consultation before we discover whether or not this proposal has survived.
There are lots of other details that will need to be worked out. In employment tribunals the line between winning and losing is not so clear-cut as outsiders may suppose. If a claimant alleges unfair dismissal, discrimination and a failure to pay holiday pay, and wins the holiday pay claim while losing the other two, would that qualify for a refund? What about cases where the employee wins an unfair dismissal claim but no award of compensation is made because of his or her contributory conduct?
These are complicated issues, but the administration is likely to be even more complicated. Who is going to collect the fees; check that the right fee has been paid in respect of an application; assess whether or not the claimant's means exempt him or her from having to pay; and refund the fee if the claimant wins? The fact is that the current employment tribunal system is just not geared up to do this, and considerable extra resource and training would be required to put the necessary systems in place. Indeed, despite all of the principled objections to the Government's proposal, I suspect that the biggest obstacle to be overcome will be the practical (and ironic) point that collecting employment tribunal fees will prove to be an expensive business.
