The introduction of issue fees and hearing fees in 2013 resulted in a 66% fall in the number of single-claimant cases. In a decision likely to have a significant knock on effect for employers nation-wide, the Supreme Court today concluded that imposing a flat-rate fee on would-be claimants in the employment tribunal had been unlawful from the outset and that the law imposing those orders should be quashed. The result is that the courts and tribunal service fees website will be taken down today and claimants will not be required to pay fees to issue claims in the employment tribunal, with immediate effect.

Background

Tribunal fees were introduced by the government in their Fees Order, on 29 July 2013. Fees started at £160 to issue a “type A claim” (e.g. wage claims, breach of contract etc.) and £250 for a “type B claim” (e.g. unfair dismissal, discrimination etc.). If the case proceeded to a full hearing, then a further hearing fee applied of £230 for Type A and £950 for Type B claims. Further fees applied for appellants who appealed against the employment tribunal judgments.

In 2013 and 2014, the union Unison brought legal challenges against the Lord Chancellor, requesting a ruling that the imposition of fees was unlawful. They argued that the prescribed fees interfered unjustifiably with the right of access to justice under both UK and EU law; and that they were indirectly discriminatory as discrimination claims attracted a higher fee, so that women and others were disproportionately and unjustifiably affected.

Decision

The claims have made rather slow progress through the courts and Unison’s claims had been rejected at every previous stage but the Supreme Court took a different view.

It noted that the employment tribunal fee structure was very different to that imposed in the civil courts. For example for small claims in the county courts, fees are graduated according to the value of the claim and begin at only £50 for claims of up to £300 and rise in stages to a fee of £745 for claims between £5,000 and £10,000. The Court also observed that in the civil courts, there was no penalty for bringing a complex claim rather than a simple one, whereas there was a higher fee for bringing a more complex claim in the tribunal. The Court also considered the fee remission system, whereby a claimant with under around £3,000 in savings would not be required to pay the tribunal fees.

It noted that the impact of fees was plain: that since the fees order had come into force; there had been a dramatic and persistent fall in the number of claims brought.

The Supreme Court also addressed the question of whether the tribunal fees had reduced the number of unmeritorious claims (one of the stated aims when the government introduced the fees regime). However the Ministry of Justice’s own review report analysed the outcomes of single claims which had been presented after fees were introduced and compared them with the outcomes of cases during the three annual quarters preceding the introduction of fees and the results showed that the proportion of successful claims had been consistently lower, since fees were introduced, while the proportion of unsuccessful claims had been consistently higher.

Access to justice under UK law

In considering the legality of the imposition of tribunal fees, the Court considered the constitutional principles underlying the fees orders and found that there were two principles that were of particular importance to the case but the most significant is the question of access to justice – being access to the courts and tribunals.

In considering access to justice, the Court was particularly scathing of the Ministry of Justice’s understanding of the importance this concept. The Court underlined that access to justice is not just a public service of value only to those who use the services of the courts. Instead the Court emphasised how access to justice has broader social benefit and that it is not always desirable that cases should be settled as judgments do help to establish legal rules and principles. Further, the court emphasised that people and businesses need to know that they will both be able to enforce their rights and that rights will be enforced against them if they fail to meet their obligations.

The Court emphasised that the Lord Chancellor cannot lawfully impose whatever fees he chooses and that the Fees Order would be outside the Lord Chancellor’s legitimate powers if there were a real risk that persons will effectively be prevented from having access to justice. The Court said that to be lawful, the fees would have to be set at a level that everyone can afford taking into account the availability of remission. The evidence that the Court considered lead to the conclusion that this requirement had not been met: the fall in the number of claims had been so sharp, so substantial and so sustained as to warrant the conclusion that a significant number of people who would otherwise have brought claims have found the fees to be unaffordable. Further, the Court said that the fees could in some circumstances make it futile or irrational to bring a claim, given the modest financial awards that some claimants seek.

As a result, the Court concluded that: the Fees Order effectively prevented access to justice and was therefore unlawful; and that it could not be justified because it had not met the secondary aims of incentivising early settlement or dis-incentivising weak or vexatious claims. Instead, the Fees Order was designed to infringe on constitutional rights.

EU legal principles

The Court also considered the EU law ‘principle of effectiveness’ that is: that the procedural requirements for domestic legal actions must not make it impossible or excessively difficult for citizens to exercise their EU law rights. It concluded that the fees imposed limits on the exercise of EU rights in a way that was disproportionate and unlawful under EU law.

Indirect discrimination

Having decided that the Fees Order was unlawful, the Court considered whether the higher fees for discrimination claims were indirectly discriminatory. It looked at the various stated aims of the introduction of fees including transferring the cost of tribunals from the taxpayer to users, deterring unmeritorious claims and encouraging earlier settlement. However, it found that a claimant with a good discrimination or unfair dismissal case (Type B) was just as likely to be deterred from bringing the case as a claimant with a bad case and the imposition of fees improved the position of respondents compared to claimants. Considering all factors together, the court found that charging higher fees for Type B claims had not been shown to be a proportionate means of achieving the aims of the Fees Order.

As for whether the fees had a higher impact on women (for example) the Court decided that it was not necessarily finally to resolve the question but that they were inclined to accept that this was correct and that if this were the case, this disproportionate impact would be unjustifiable.

Conclusion and practical impact

The Court concluded that the Fees Order was unlawful from the moment that it was brought into force, because it prevented access to justice; and that it must be quashed.

The practical impact of this is that the Fees must now fall away but it is likely that the Government will consider imposing a new fees regime but until then fees cannot be imposed. This may result in an increase in the number of claims being brought.

Finally, we understand that the Courts and Tribunals Service is looking at how it can reimburse those claimants who have paid fees over the last 4 years.