The Supreme Court has upheld Unison’s appeal and found that the Employment Tribunal fee regime is unlawful. The fee regime introduced in 2013 required Claimants in most cases to pay £250 to lodge a claim, and a further £950 to proceed to a hearing. With this system now being declared unlawful there are lots of interesting questions about why the decision was made, and perhaps more importantly, what happens next.

Why did the Supreme Court decide that fees were unlawful?

The Supreme Court found that the Employment Tribunals and the Employment Appeal Tribunal Fees Order 2013 (which brought about the fee regime) denied access to justice and as such contravened both UK and EU law.

The impact of fees was considered. The Supreme Court found that fees had led to a ‘dramatic and persistent fall’ of around 70% in the number of claims presented. Less people qualified for remission than had been anticipated. Fees were meant to help fund the tribunal system and ensure that users made a contribution to the cost of the service. However, due to the drop in claim numbers, that aim had not been effectively realised. Nor had fees been shown to encourage more Acas settlements, or deter vexatious claims.

The court found that fees denied access to justice – an entrenched principle of UK constitutional law. It is not permissible to price people out of the justice system and that is effectively what the fee order did. The Supreme Court heard evidence on how the level of fees could, if paid, result in families being unable to maintain an acceptable living standard, and as such fees could not be regarded as affordable.

Furthermore, the Supreme Court found that the level fees were set at was disproportionate given the average value of claims. The fee to bring a wages claim totalled £390, but the average sum recovered for such a claim is only £500. Taking into account litigation risk and the fact that only around half of tribunal awards are paid in full, in many cases it would be irrational to pursue such a claim given the size of the fee.

Many employment claims derive from Europe and fees were also found to contravene EU law. The European principles of effectiveness, judicial protection and the human right to a fair hearing were considered. Ultimately, it was found that tribunal fees placed a financial restriction on the right of access to a court or tribunal, the level fees were set at was disproportionate and they could not be justified.

Finally, discrimination concerns were addressed in a separate judgment by Lady Hale which provided that the fees regime amounted to indirect sex discrimination. More women raise discrimination claims than men. Discrimination claims fall within the higher category B fee level, and Lady Hale considered that the higher fee had not been objectively justified.

What happens next?

Do you need to pay a fee if you want to raise a claim today? Immediate steps are being taken to remove the need for payment of a fee to initiate an employment tribunal claim. The employment tribunal service is already refusing to accept fees when claims are presented in person. The online submission process will take longer to update, but we understand that steps are being taken to allow online claims to be submitted without a fee. Until the computer system is updated, if you are trying to raise a claim online you may need to pay the fee but should include a note in the claim form that you expect the fee to be refunded to you.

What happens if you have already paid a fee? When the fee regime was first introduced, the Lord Chancellor gave assurances that if the regime was found to be unlawful then fees paid would be refunded: the Supreme Court has now confirmed that this should happen.

As well as being costly, paying the money back could be easier said than done. The tribunal service will need to track down claimants (and respondents) and arrange for refunds of fees paid since 2013. However, in practice, employers often agreed to cover the cost of any fee paid by an employee as part of an out of court settlement or were ordered to compensate the claimant for the cost of the fee if the employer lost the case. It is doubtful that fees paid as part of a settlement package could ever be recovered by an employer. Employees may therefore end up with a windfall if they also receive a refund from the tribunal service of a fee which they have already been refunded for.

What if the fees deterred you from raising a claim previously? Some individuals may now argue that the only reason they did not raise a claim, was because they were put off by having to pay an expensive fee. We might see applications from individuals seeking to raise a claim months, if not years, after the time limit expired. The tribunals will then need to decide whether to extend their strict time limits to allow such claims to proceed. Issues that employers thought they had heard the last of could therefore resurface. The tribunal service may issue guidance on how such claims, and in particular applications to extend time, are to be dealt with to ensure consistency, although technically each claim will have to be considered on its own merits. There may be a flurry of claims being lodged in the coming weeks/months from individuals seeking to ensure that they raise their claims as soon as possible after the removal of fees, thus putting themselves in the best position to succeed in an application to extend time.

Ultimately, prospective claimants may find that they need to pursue the Government for a remedy in the civil courts, if they have been prevented by the fee regime from accessing justice in the employment tribunal. However, claims of this nature against the Government will not be straightforward as it is likely to be difficult for a claimant to show they would have presented a claim but for having to pay an unlawful fee and, secondly, that if they had presented a claim they would have been entitled to compensation. So, while technically, there could be a flurry of old claims, we consider the Supreme Court’s decision is more likely to have impact by increasing the number of new claims going forward.

Will there be a new fee regime? It remains to be seen whether the fee regime will be amended or scrapped it in its entirety. While fees for prospective claimants at the current level have been ruled unlawful as hindering access to justice, the Government may attempt to salvage the fee regime by seeking to introduce new, lower, fees for general claims. The Government might also argue that fees for Judicial Mediation and other aspects of using the tribunal process are not unlawful and should continue. The UK Government is already consulting on the fee regime in England and Wales and so it is likely that a new system of fees could be introduced there. We may end up with a different approach in Scotland: the SNP are opposed to fees and have promised to abolish them, and the management of employment tribunals are already due to be devolved to Scotland. A quick, clear steer from both the UK and Scottish Governments will be helpful. For the moment it is clear that claimants do not have to pay a fee to lodge a claim or be granted a hearing.

Is it good news? Many people will cheer the abolition of employment tribunal fees. The Supreme Court considered them a barrier to justice, evidenced by a 70% drop in claims since the introduction of fees. However, if the removal of fees leads to an increase in claims again, businesses may face added costs. This highlights the need for good management and smart, low-cost, ways of resolving disputes in the workplace. Applying to an employment tribunal should be a last resort but when this happens, we need to ensure our tribunal system can promptly and cost-effectively resolve those disputes referred to it. General changes to the tribunal system in England and Wales are already being considered, and further changes can be expected in Scotland after the tribunals are devolved. The Supreme Court’s decision declaring fees unlawful will now play a part in shaping any future reform of the employment tribunal service in the UK.

You can read the full judgment here.