Andrew Brown, associate in Anderson Strathern LLP’s Employment Unit
The Ministry of Justice has announced its conclusions following the consultation on the subject of Employment Tribunal fees.
As expected, there are protestations that it ensures that justice is for the rich or the poor but for no one in between.
The Employment Tribunal system as it stands, has been claimed by many to offer equal access to justice.
However, no system can be ideal. Claims can be brought online quickly and easily without the use of a lawyer. No fee is payable.
While there is a facility to award expenses against Claimants where the claim is vexatious or lacks reasonable prospects of success, in practice expenses are awarded in less than 1% of cases.
In reality Claimants have nothing to lose. Employers on the other hand, stand to lose potentially significant sums of money if an award is made.
Therefore employers often feel forced to instruct solicitors as soon as a claim is raised, in which case they have already lost.
The government’s willingness to look at problems and then to consider matters, must be lauded. Nonetheless, the government’s motivations are unclear.
When fees were initially mooted, the government argued that it would reduce the number of weak claims which would, in turn, assist business and economic growth.
There followed much debate on the merit of that assertion.
This month’s press release announcing the outcome of the consultation is consistent with that message in stating that: “The intention is to encourage people to look for alternatives – like mediation – so that tribunals remain a last resort for the most complex cases.”
However, there is undoubtedly a shift in the emphasis behind the justification.
The Ministry of Justice’s full response to the consultation states that “The fee proposals are therefore intended to relieve some of the financial burden on the taxpayer by requiring users of the employment tribunals and EAT to make a contribution to the cost of the service that they receive where they can afford to do so”.
Under the proposals fees are paid up front and, in most cases, are paid by the Claimant.
If the aim is simply to ease the burden on the taxpayer, why not have fees paid at the end?
Indeed, why not force the “at fault” party to pay? The government’s response to such questions is: “We believe that a system where payment (or remission granted) is made in advance of HMCTS incurring the cost is the best method of ensuring that fees are paid promptly, with the minimum amount of administrative effort whilst ensuring that the taxpayers’ financial burden is reduced.”
That can hardly be argued with. However, the next sentence is more aligned with the originally professed motivation of reducing the number of weak claims: “Seeking a payment after the event also removes any benefit that fees can have in encouraging parties to resolve disputes at an early stage and to think more carefully about the alternative options to making a formal claim.”
Fees are to be paid at two different stages. The first fee is the “issue fee” paid at the time of raising a claim. The second is the “hearing fee” to be paid 4 – 6 weeks prior to the hearing if the claim has not been resolved.
The fees are as follows:
Level 1 claims would be subject to a £160 Issue Fee and £230 Hearing Fee, for a total of £390.
Level 2 claims would be subject to a £250 Issue Fee and £950 Hearing Fee, for a total of £1200.
Level 1 claims are generally sums due on termination of employment e.g. unpaid wages, payment in lieu of notice, redundancy payments.
Level 2 claims include those relating to unfair dismissal, discrimination complaints, equal pay claims and whistleblowing claims.
In what circumstances then does the government believe that people “can afford” to take the risk that such fees create?
Those who are in receipt of certain state benefits will not be required to pay any fees at all. Those with household incomes below a certain threshold will also not be required to pay fees.
For example, a couple with two children will require a joint income in excess of £23,860 before there is a requirement to pay fees.
As the bulk of claims are unfair dismissal claims, the bulk of those claimants have not yet obtained new employment and the average salary in the UK is around that figure (depending on what statistics are used) this leaves a substantial number of people who will not have to pay fees.
There are, of course, individuals who have an income which would ordinarily render them ineligible for fee remission but who have considerable overheads.
A director of a company who has been dismissed may previously have earned £80,000, have a partner earning £30,000 but a mortgage of £400,000 which reduces their disposable income. In such circumstances the individual may be able to qualify for fee remission.
The government states that: “the introduction of fees with the measures we are proposing, and, in particular, the remission scheme will mean that claimants will not be prevented from bringing cases to the tribunal”.
That surely cannot be true? In very many cases they will be prevented because there are few who can afford to take the gamble posed by fees at the proposed levels.
Do they spend what little disposable income they have on bringing a claim or keep it to tide them over? They may not be precluded but they will be prevented. It appears clear that, regardless of the change in emphasis, that must be a significant part of the government’s motivations.
Where does this leave employers? The risk of spurious claims will reduce. Indeed the risk of claims with merit will also reduce.
Coupled with the fact that new employees must now acquire two years’ service to bring a claim, the fee system brings good news for employers.
However, it brings bad news for employees and will impact on job security.
We must hope that the result is the claimed benefit for both the economy and the taxpayer.
The intention is that the changes will be implemented in summer 2013.
Andrew Brown is an Associate in Anderson Strathern LLP’s Employment Unit who acts for employers and employees.