New employment tribunal rules come into force on 29 July 2013. Employers need to be aware of some important changes, which will affect how claims are handled and the opportunities for settlement.
Following a review of the current tribunal rules by Underhill J (as he then was) in 2012, revised rules are to be introduced for all tribunal claims whether issued before or after 29 July 2013 (save for certain counterclaims and appeals covered by transitional provisions).
The aim of the review was to simplify tribunal procedure and encourage efficient case management. The rules have been shortened, simplified and put into plainer English, and although there are no seismic changes, there a few notable improvements to process as highlighted below (along with some more technical changes).
2. Early sift
Perhaps the most significant change for parties is the new initial sift stage, whereby an employment judge will automatically review every case on paper once the claim and response forms have been submitted. The judge will be able to strike out claims or responses which have 'no reasonable prospect of success' and case management directions will be given if the claim is to proceed. Parties subject to a decision to strike out will have the right to make written representations and, if these are not accepted, to a hearing.
Parties may therefore invest more time and money up front, to provide a more fully particularised claim form or response than they might have done under the previous regime, rather than relying on adding detail at a later stage. It is to be hoped that frivolous or tactical claims will be discouraged by, or rejected at, this new stage, and early judicial consideration of the merits may facilitate settlement. On the other hand, where a claim has passed an initial sift, this may make it more difficult to obtain a strike-out or costs order later on.
3. Claims and responses
Changes to the process for submitting claims and responses include:
- There will be new simplified ET1s and ET3s, which are not yet available but will be downloadable at http://www.justice.gov.uk/forms/hmcts/employment from 29 July 2013. The new ET1 form will require claimants to set out what compensation they are seeking and how this is calculated. This will not be binding on them and can be revised later, but may be useful information when considering early settlement, certainly for small to medium value claims. Tribunals will have new powers to reject claims if they are in 'a form which cannot sensibly be responded to, or is otherwise an abuse of process'.
- Revised provisions on the tribunals' jurisdiction clarify that overseas employers cannot escape claims based on acts occurring overseas simply because they do not carry on business in England & Wales/Scotland; tribunals will have jurisdiction if the work has been partly performed here or there is a connection with this jurisdiction. Employees seconded to work in England by an overseas employer may therefore have a claim here, even if the claim relates to acts occurring abroad. (This change reflects how case law interpreted the old rules, albeit this required a very strained construction).
- The rules have been relaxed for respondents who miss the original 28 day deadline for submitting the ET3. Currently a respondent can only apply for an extension of time before the deadline has expired; this will now be possible afterwards. The test for obtaining an extension has also been eased: the respondent is no longer required to explain why it literally 'cannot' comply with the original time limit, and an extension is no longer conditional on it being 'just and equitable' nor on there being a reasonable prospect of a successful defence. Further, a default judgment will no longer be issued automatically without a hearing where the employer has failed within the time limit to submit an ET3 or application to extend time. The employment judge will have a discretion to decide whether they can determine the claim from the information they have before them, or from further information they can request the parties to provide, or whether a hearing is still required. The judge can also decide to what extent a respondent can be permitted to participate in the future proceedings.
4. Case management
- Prior to the final hearing, under the current rules a public, pre-hearing review is needed to consider any substantive issues relating to the proceedings (such as an application to strike-out), while a private case management discussion considers procedural issues. Under the new rules, there will be just one 'preliminary hearing' at which both procedural and substantive issues can be considered. Where substantive issues are to be considered, 14 days' notice will be given and the tribunal can direct that part or all of the hearing be in public.
- There will be provision for the Presidents of the tribunals to issue guidance on matters or practice to assist users and hopefully improve consistency of tribunal approach (although tribunals will not be bound by it).
- Tribunals are required "wherever practicable and appropriate" to encourage parties to use ACAS, judicial or other mediation, or other means of achieving settlement. Parties will need to attend any hearings ready to discuss their approach to settlement. The new regulations expressly empower the President to issue practice directions allowing a judge to act as mediator in a case they have been selected to decide; the parties would clearly have a strong incentive to appear reasonable in any such mediation.
- The new rules make explicit the trend towards pro-active case management. Tribunals now have an express power to set a hearing timetable to limit time for evidence, witness questioning and submissions and are able to 'convert' preliminary hearings to final hearings and vice-versa, unless either party would be substantially prejudiced. Any witness statement which stands as evidence in chief and is admitted as evidence shall be available for inspection during the course of the hearing by members of the public attending the hearing (unless there is a restricted reporting order or national security issues).
5. Other changes
Two other significant changes will come into force at a later date:
- In April 2014, a mandatory pre-claim Acas conciliation period is to be introduced. The claimant must send basic details to ACAS (not including details of the complaint) and obtain a certificate of compliance to allow them to submit an ET1. This will have a 'stop-the-clock' effect on the time limit for submitting the ET1 (but not if conciliation is initiated by the respondent). Designed to ease tribunal caseload and encourage early settlement, the requirement may well be successful in relation to simple or low value claims but runs the risk of simply delaying other claims and using up limited ACAS resources.
- Financial penalties of up to £5,000 payable to the Secretary of State will also be introduced for employers who are unsuccessful at tribunal and whose breach has one or more 'aggravating features'. There is a 50% reduction in the fine if the employer pays within 21 days. The latest Government announcement stated that there is no implementation date for this change as yet.
6. Tribunal fees
The revision of tribunal rules coincides with the introduction of fees in tribunals for claims presented on or after 29 July 2013, subject to the outcome of two judicial review applications (see box below).
An individual will need to pay a fee at issue of the claim and a hearing fee to be paid at the date specified in the notice listing the hearing. There is no refund if the claim is settled prior to the hearing. Fee payments may be made online or through a central processing centre. The timing of the fee requirements may affect attitudes to negotiating a settlement at particular stages in a claim. Some commentators have suggested it will damage the prospects of early resolution of disputes, as employers wait for claimants to show they are serious by parting with their money. However, once the claimant has done so, he/she may be less inclined to settle unless the employer agrees to reimburse the fees paid as part of the settlement.
There will be a fee structure for single claimants and another for multiple claimants. Within each structure, level A claims are of a lower value and more straightforward; level B claims are those of a higher complexity and value (including unfair dismissal, discrimination and whistleblowing). For single claimants, the type A issue fee £160 is and the hearing fee is £230, whereas for type B claims the issue fee is £250 and the hearing fee is £950. Multiple claimants' fees are larger, and are staggered according to the number of claimants within a claim.
Judicial review applications
- Two judicial review applications have been made, one in Scotland by Fox and Partners, and one in England by Unison, challenging the introduction of tribunal fees on a number of grounds. These include the suggestion that it discriminates against certain protected categories and has the effect of denying claimants an adequate means of enforcing EU rights.
- Although the Scottish Court of Session refused an interim interdict to stop implementation on 29 July 2013, the Court did allow the judicial review application to proceed to a full hearing later in 2013 (probably October), with implementation of the fee regime to go ahead on 29 July on the basis that the government has given a Great Britain-wide undertaking that if the fees regime is found to be unlawful, all fees will be repaid with interest.
- On 23 July 2013 Unison's application for judicial review of the fees regime was refused on paper. It has requested an oral hearing for permission, which is listed to be heard at 10am on Monday 29 July 2013. Their application for an interim injunction to stay implementation will also be considered at this hearing.
The current civil court fee remission system (based on an income test) will be available to employment tribunal claimants who apply at issue of the claim, although this system is expected to be amended following consultation from autumn 2013. The proposed new system adds a disposable capital test to the income test: anyone with over £3,000 household disposable capital will be ineligible for remission. Tribunals must reject a claim if it is not accompanied by a fee or remission application. If the fee provided is lower than required, or a remission application is later refused, the claim will be rejected if the claimant fails to pay the full fee by the date specified in a tribunal notice.
Remission applications may take some time to determine. Employers who settle a claim after a fee has been paid and for a sum including reimbursement of that fee may wish to include a term requiring repayment of that element of the compensation should any remission application be successful.
Given the size of fees, and the level of the proposed remission test, the number of lower value claims may well fall, as may claims from those with capital just above the remission test, given they could have to gamble with a third of their savings to bring a claim. Some claimants may, however, be able to recoup the fees via household insurance policies if they include legal cover, while union members may be able to take advantage of union funding or loans pending a remission application.
It is also worth noting that employers have to pay a fee in certain circumstances, by the date specified in a tribunal notice: on application to have a judgment or default judgment reconsidered or a case dismissed, on issuing a counterclaim, or for judicial mediation. There are also fees to appeal to the EAT. Tribunals also have a discretion to order an employer to reimburse the fees of a successful claimant.
Overall, the new rules are clearer and more 'user-friendly' for employers, employees and legal advisers. It is hoped that the simplified rules in conjunction with broader case management powers for tribunals will encourage a trend towards more effective and efficient case management. Employers will want to keep a close eye as tribunal practice on the new rules develops, particularly in light of any Presidential guidance issued.