Introduction
Background
Unison's legal challenges
Court of Appeal decision
Further developments
Supreme Court decision
Comment


Introduction

The Supreme Court has unanimously ruled that the legislation requiring fees to be paid for bringing employment tribunal claims is unlawful and should be quashed.(1) In one of the most remarkable employment law judgments of recent times, the court held that employment tribunal fees interfere unjustifiably with the right to access to justice and discriminate unlawfully against women.

The upshot is that as of July 26 2017, fees cease to be payable for claims in the Employment Tribunal and appeals to the Employment Appeal Tribunal. In addition, the government will be required to reimburse all fees paid by claimants since the regime was introduced in 2013.

Background

The government introduced employment tribunal fees in July 2013 by means of the Employment Tribunals and the Employment Appeal Tribunal Fees Order 2013.

The order divided claims into two types:

  • Type A claims included those for statutory redundancy payments, unlawful deductions from wages, breach of contract and failure to permit statutory time off. The issue fee for a Type A claim was £160 and it cost a further £230 for the full hearing (£390 in total).
  • Type B claims included those for discrimination, unfair dismissal, whistleblowing and equal pay, and were more expensive – £250 to issue and £950 for the full hearing (£1,200 in total).

Full and partial fee remissions were available for those with limited resources, with both an income and a capital test to determine eligibility for remission. The lord chancellor also had discretion to waive fees in exceptional cases. Employment tribunals had to reject claims if they were not accompanied by the prescribed fee.

The introduction of fees was controversial because employment tribunals were originally designed as an inexpensive and accessible forum for settling employment disputes. The contentious nature of the fee regime was exacerbated by the fact that only claimants had to pay fees to participate in the proceedings – respondent employers did not. However, losing employers were often ordered to reimburse the claimant's fees at the end of a case. The government's stated aims in introducing fees were threefold:

  • to transfer some of the employment tribunal system's running costs to those users that could afford it;
  • to discourage unmeritorious claims; and
  • to encourage earlier settlement and alternative means of dispute resolution.

Unison's legal challenges

Trade union Unison challenged the lawfulness of the fee regime in a judicial review application made in June 2013, before the Employment Tribunals and the Employment Appeal Tribunal Fees Order came into effect. In February 2014 the High Court dismissed the claim on the basis that it was too early to tell what impact the order was having on claimants.

In March 2014 the Ministry of Justice issued statistics which showed a 79% drop in employment tribunal claims during October to December 2013 (the first full quarter since the introduction of fees) compared to the equivalent period in 2012. Unison appealed against the High Court decision, but – before it could be heard – the lord chancellor agreed to a stay of the appeal to allow fresh judicial review proceedings in light of the new statistical evidence.

Unison applied for a second judicial review on the following grounds:

  • The fees breached the principle of effectiveness under EU law because they made it "virtually impossible or excessively difficult" to exercise rights conferred by EU law (eg, equal pay).
  • The higher fees in Type B claims amounted to unlawful indirect discrimination against women and other protected groups.

The High Court rejected the application for judicial review, finding no evidence that the dramatic drop in claims was caused by claimants' inability to pay the fees rather than unwillingness to take a risk. Accordingly, the statistics did not prove that the principle of effectiveness had been breached. On the issue of indirect discrimination, the court held that there was no disparate impact on women (the only protected group on which evidence had been heard) and in any event the fees regime was objectively justified.

Court of Appeal decision

Unison appealed to the Court of Appeal, which upheld the High Court's reasoning and decision. It held that the statistics showing the reduction in claims were compelling, but not enough on their own to prove that the principle of effectiveness had been broken. The fact that the lord chancellor had discretion to grant remission to those claimants that would not otherwise qualify for it meant that the regime did not automatically prevent claimants from bringing proceedings.

The court also agreed that, insofar as the fees regime affected women disproportionately, it could be justified. The higher fees for Type B claims corresponded to the increased demand that those claims placed on the system. Further, it held that the government had complied with its equality duty, dismissing Unison's arguments that it had failed to anticipate the effect of the fees regime or assess whether it adversely affected the elimination of discrimination. Unison appealed to the Supreme Court.

Further developments

Meanwhile, in June 2016 the House of Commons Justice Committee published a report concluding that the employment tribunal fee regime had had a significant adverse effect on access to justice. It recommended substantially reducing the level of fees and simplifying the remission system, as well as increasing the thresholds to qualify for remission.

However, in January 2017 the Ministry of Justice published its own post-implementation review which concluded that the fee system was working well. The ministry agreed that potential claimants may have been discouraged from bringing claims, but found no evidence that they had been prevented from doing so. It concluded that the public sector equality duty had not been breached and any indirect discrimination could be justified. The Ministry of Justice rejected all of the Justice Committee's recommendations, but stated that it would introduce certain minor reforms, including adjusting the remission scheme by slightly increasing the monthly income threshold.

Supreme Court decision

By the time Unison's challenge reached the Supreme Court, the legal arguments had moved onto broader principles focusing on the right to access to justice as an essential element of the rule of law. Unison contended that employment tribunal fees unjustifiably interfered with this right under both UK common law and EU law. It also argued that specific employment rights legislated by Parliament could not be reduced by means of a statutory instrument issued by a government minister. Finally, Unison pressed the argument on indirect discrimination, which it had pursued before the lower courts.

In a unanimous judgment, the seven Supreme Court judges allowed the appeal and ruled that the Employment Tribunals and the Employment Appeal Tribunal Fees Order prevents access to justice and should be quashed.

The empirical evidence as to the operation of the order showed that it had had a dramatic impact on the number of claims (particularly low-value claims). It had also:

  • made a lower contribution to employment tribunal costs than predicted;
  • failed to deter unmeritorious claims; and
  • appeared not to have encouraged settlement of cases.

Against that background, the court emphasised the fundamental importance of unimpeded access to the courts as a means of ensuring that laws created by Parliament are applied and enforced. Access to courts and tribunals was of value not just to users of the system, but to the public as a whole. The court concluded that the Employment Tribunals and the Employment Appeal Tribunal Fees Order would be unlawful if there was a "real risk" that it effectively prevented people from having access to justice or the degree of intrusion into access to justice went beyond what was justified by the order.

While small-claims fees in the civil courts are related to the value of the claim, the employment tribunal fees bear no direct relation to the amount sought and could therefore deter claims for modest sums or non-monetary remedies. Evidence showed that fees were the most frequently cited reason for not submitting a claim, while worked examples of hypothetical claimants showed that in order to pay the fees, they would have to restrict spending that was ordinary and reasonable for maintaining living standards.

Whether fees effectively prevent access to justice had to be decided according to their likely impact on "behaviour in the real world". If low to middle-income households could afford fees only by forgoing an acceptable standard of living, they could not be regarded as affordable. Moreover, the court considered that even where fees are affordable, they prevent access to justice where they make it futile or irrational to bring a claim. For example, no sensible claimant would pay a substantial fee to pursue a modest claim, unless it was virtually certain to succeed and the award would include recovery of fees and be satisfied in full.

The court therefore concluded that the Employment Tribunals and the Employment Appeal Tribunal Fees Order effectively prevented access to justice. Further, although the stated purposes of employment tribunal fees were legitimate aims, it had not been shown that the order was the least intrusive means of achieving those aims. It also imposed disproportionate limitations on the enforcement of EU employment rights.

Finally, the court upheld Unison's arguments that Employment Tribunals and the Employment Appeal Tribunal Fees Order constituted indirect discrimination against women, as well as others with protected characteristics, contrary to the Equality Act 2010. In particular, because Type B cases (including discrimination claims) attract a higher fee and a higher proportion of women bring such claims than Type A claims, women are placed at a particular disadvantage. The charging of higher fees for Type B claims had not been shown to be justified as a proportionate means of achieving the government's stated aims in introducing the order.

For these reasons, the court concluded that the Employment Tribunals and the Employment Appeal Tribunal Fees Order prevented access to justice and was unlawful under both UK and EU law – to the extent that rights asserted before employment tribunals are based on EU law. Since the order had this effect as soon as it was made, the court ruled that it was unlawful ab initio (ie, from the beginning) and must be quashed.

Comment

This momentous judgment will have lasting significance far beyond the world of employment law. It is a powerful and resounding reaffirmation of the importance of the rule of law in society and the constitutional right of unimpeded access to the courts. The Supreme Court relied on historic authorities and sources in reaching its decision, even including words from Magna Carta: "We will sell to no man, we will not deny to any man either Justice or Right."

The judgment will also have immediate political ramifications, given that the Labour Party's general election manifesto pledged the abolition of employment tribunal fees, whereas the Conservatives were silent on the matter. Interestingly, the judgment chimes with a study published earlier this year on employer attitudes to employment law, which revealed significant opposition to employment tribunal fees. It found that a majority of employers responding to the survey wanted fundamental change, with 15% arguing the employment tribunal fees should be abolished, 11% agreeing that they should be substantially reduced and 19% supporting a single £50 fee for all claims.

This should provide food for thought for the government, which must now decide whether to develop proposals for a new employment tribunal fees regime that could be defended before the courts as being compliant with proper access to justice. This will no doubt take some time and a consultation document is likely to be published in due course.

Pending that process, one immediate consequence of the Supreme Court judgment is that fees are – for the time being – no longer payable for either bringing an employment tribunal claim or appealing to the Employment Appeal Tribunal. This will present administrative and logistical challenges for the employment tribunals. However, the guidance on completing the ET1 online claim form has already been amended to state: "You do not have to pay a fee to make a claim to the Employment Tribunal, even if it says so on the form." There will likely be a significant increase in employment tribunal caseloads, particularly lower-value claims, for which the tribunals may be inadequately resourced.

In addition, it has been reported that the Ministry of Justice has committed to begin the process of reimbursing employment tribunal claimants immediately, for claims dating back to 2013. How this is implemented in practice remains to be seen; it will be a complex and time-consuming project.

Finally, would-be claimants who were previously deterred from pursuing an employment tribunal claim by the obligation to pay a fee will likely now seek to bring their claims out of time. Whether employment tribunals will allow this will depend on the type of claim and the particular circumstances. For example, with an unfair dismissal claim, the issue would be whether it was not reasonably practicable to bring a claim within the time limit on account of the fees regime. In contrast, in a discrimination case, the test would be more flexible – whether it is now just and equitable to extend time to bring the claim.

For further information on this topic please contact Colin Leckey, Richard Lister or Bethan Carney at Lewis Silkin by telephone (+44 20 7074 8000‚Äč) or email ([email protected], [email protected] or [email protected]). The Lewis Silkin website can be accessed at www.lewissilkin.com.

Endnotes

(1) R (on the application of Unison) v Lord Chancellor (2017) UKSC 51.