The introduction of employment tribunal fees

Consultant editor Darren Newman asks what impact the introduction of employment tribunal fees will have on the number of tribunal claims being pursued, and considers the long-term future of the tribunal system.

The sight of the Government scrambling to get its much-derided "rights for shares" scheme on to the statute book before the end of the last session of Parliament was an entertaining one. The Government made extensive concessions to opponents of the measure, with the result that the scheme that was finally adopted is so complicated that it is of little use to anybody.

In the meantime, a much more important change is taking place with far less parliamentary scrutiny. At some stage this summer, employment tribunals will begin to charge a fee for bringing an employment tribunal claim. No firm implementation date has been given, but all the indications are that the scheme is on course and will be introduced before the autumn. However, this will largely depend on the necessary administration systems being up and running in time.

When the new system kicks in, it will be, I think, the biggest single change to the employment tribunal system that I have seen in my long career in employment law. Until now, a key feature of the employment tribunal system is that it has been free to use. It is designed to give vulnerable employees a place to go when they feel that their employer has treated them unfairly or broken the law. Now those vulnerable employees will have to consider whether or not they can afford to bring a claim and if a trip to the employment tribunal is worth the financial risk.

For employers it is difficult to see a downside. Although there may be occasions when the employer is called on to pay a fee - for example, in relation to an application for judicial mediation - for all intents and purposes the cost of funding the employment tribunal system is being placed firmly at the door of the claimant. It is the claimant who must stump up the initial fee of £160 or £250, depending on the nature of the claim, and subsequent hearing fee, which will be either £230 or £950.

In most cases, the employer will be ordered to pay the fee back to the claimant should the claim succeed. But the question that is as yet unanswered is what the impact will be on the number of employment tribunal claims that are brought in the first place. One view is that there will be very little change. An extensive remission system will apply so that a fee will not need to be paid by a claimant who is in receipt of certain specified benefits, such as jobseeker's allowance, or who is on a very low income. Since most employment tribunal claimants have just lost their job, it is likely that the majority of those contemplating a claim will not have to pay a fee at all.

However, the remission system is a complex one and many employees of limited means will be required to come up with a fee in order to bring a claim. It is quite possible that many will be deterred from making a claim and that the number of tribunal claims will see a dramatic fall. But don't fall for the myth that the fee system will deter vexatious claimants. In my experience, truly vexatious claimants are rare. However, there are plenty of claimants with an unrealistic view of their chances of success, and I think that these are the very people who will manage to stump up the fee somehow.

The psychology of litigation is complicated. Perhaps people will be deterred from bringing a claim, but it is also possible that, having paid for their case to be heard, many employees will be even more determined to persevere with it, so fewer cases will settle. An individual may be more determined to have his or her day in court having already paid for the privilege.

One noticeable feature of the new scheme is the relatively high fee given the nature of the claims that can be brought before the tribunal. Awards for unfair dismissal are typically below £5,000, yet £1,200 must be paid in fees for the claimant to reach the point of being awarded that sum. In relation to smaller monetary claims, the disparity is even more apparent. An employee who has suffered a £50 unlawful deduction from his or her wages and wants to recover that sum in the employment tribunal must pay an issue fee of £160 and a hearing fee of £230. Of course, if the claim is upheld the employer will be ordered to compensate the employee for having to pay the fee, but that is still a large sum to risk for a small amount of money. We should also remember that many tribunal awards go unpaid and that enforcing a tribunal award brings its own complications.

Many employment advisers are already considering if it might not be more effective to bring a claim in the county court, where, in many cases, the fee for recovering unpaid wages will actually be lower. Of course, in the county court one does not get the expertise of an employment judge, but in small monetary claims that expertise may not really be worth the additional cost.

If we put the introduction of fees together with other tribunal reforms such as the extension of the situations in which an employment judge sits alone, cynical observers might begin to question if the employment tribunal system has a future. With lay members largely absent and the fee system in place, what will the difference be between an employment tribunal and the county court? Both are supervised by the same government department and in many parts of the country they already sit in the same building. Might we not be moving to a system in which the employment tribunal is subsumed into the county court, with some county court judges merely developing a speciality in employment cases?

Employers often call for the reform of the employment tribunal system, but, generally speaking, what they are looking for is a less legalistic approach. Judges sitting alone and court fees are unlikely to achieve that. Before the system drifts even further away from the original vision of a cheap and informal way of resolving employment disputes, it is perhaps time for both sides of the employment relationship to consider what sort of system they really want and how it should work.

perspective@xperthr.co.uk