The introduction of employment tribunal fees: what could the impact be?

Andreas White, employment partner at Kingsley Napley LLP, considers the consequences of fees for employment tribunals.

The Government has published its response to the consultation on introducing fees in employment tribunals and the Employment Appeal Tribunal. Announcing the fees that will apply “from summer 2013”, the justice minister stated: “We want people, where they can, to pay a fair contribution for the system they are using, which will encourage them to look for alternatives.” These would include, for example, mediation, Acas conciliation or directly negotiated settlement.

The consultation process commenced in 2011. It revealed a wide range of opinions on the proposed introduction of fees. It became clear that there is no consensus on this subject, but the Government is determined to press ahead. We now have a much clearer idea of what to expect.

Varying fees

The fees themselves will vary, depending on the circumstances. In a typical single-claimant case, the claimant will pay a £250 fee on the issue of their tribunal claim, and then a £950 hearing fee on a date to be determined (expected to be four to six weeks before final hearing). The fees will be lower for more straightforward claims, such as unlawful deduction from wages. Fees will also apply to certain applications during tribunal proceedings. For example, an employer making a breach-of-contract counterclaim will pay a £160 fee, while an application for judicial mediation will cost £600 (also payable by the employer).

Whether or not you agree with the Government’s proposals, the real question at this stage is what the impact in practice on employment tribunal litigation will be. The tribunal can trace its roots back to the establishment of the industrial tribunal in 1964. Until now, it has always been a fundamental principle of the system that no fees apply, so it is fair to say the introduction of fees will be a major development that is bound to have ramifications on both sides, both for claimant employees and respondent employers.

No substantial drop in claims

Although I agree that some claimants will be likely to think twice before issuing their claims, in itself I do not see the introduction of such fees causing a substantial drop in the number of claims.

I certainly doubt that many senior executives will decide not to bring their claims because of the fees referred to above. Their impact is likely to be felt most among the “rank and file” of junior employees and unskilled workers, as well as among middle-ranking employees and managers, and among the members of those professions that typically do not receive large salaries (for example, nurses and teachers). The intention is that claimants with very limited means will be protected by an extension of the civil court remission system, which allows full or partial remission of fees on certain grounds, for example receipt of benefits. However, I doubt the remission system will work well in practice: I fear it is likely to cause problems and increase complexity, even if the Government is now committed to reviewing it.

Concern for many claimants

While I certainly recognise that the introduction of fees will be a real concern for many claimants, I anticipate that claimant employees and their advisers will find ways of addressing this new challenge. Indeed, the Government’s own press release appeared to recognise this in part when it stated “in practice, cases are often settled rather than there being a clear ‘winner’ or ‘loser’ and the issue of reimbursement would form part of the settlement”.

As well as scenarios where claimants negotiate for reimbursement of their fees in a settlement agreement or obtain discretionary orders from the tribunal for their reimbursement by employers, creative claimants and their representatives are likely to adopt other solutions. Sources of funding will emerge, for example from unions, staff associations or even insurers.

Contingency fee agreements

In recent years, we have seen a growing trend towards the funding of tribunal claims via contingency fee agreements, which are a type of “no win no fee” arrangement, whereby the claimant’s lawyer typically takes approximately one-third of the employment tribunal award or settlement. For claimants, these low-cost and low-risk funding arrangements will only become more attractive after the introduction of tribunal fees.

The Government hopes that the introduction of fees will encourage earlier settlements, but it may only exacerbate the problem of the late settlement of claims. It is not at all unusual for the respondent employer to wait until a late stage before settling. Many employers will be more tempted than ever to wait until late in the litigation process before making a concerted effort to settle. Once the final hearing fee has been paid by the claimant, not only will the employer be well placed to assess the strength and value of the claim, but also the claimant’s determination to go all the way if necessary will be clearer.

Use of specialist employment lawyers

A further likely impact of these changes will be an acceleration of the trend towards the use, on both sides, of specialist employment lawyers. This is because, with the introduction of fees, the tribunal system is only going to get more complex. Originally, it was designed to be informal and accessible to all, but those days are long gone.

Regrettably, I do not think these changes will make the experience of tribunal litigation more satisfactory. Employment tribunals have, for many years, been chronically under-resourced, leading to frequent problems such as inadequate case management, lengthy delays and wasted costs for all concerned. In a separate development, the employment tribunal rules of procedure are being reformed. This is a positive development and should lead to some improvement for tribunal users, but it does not address the resourcing issue. The introduction of employment tribunal fees could have been used to this end but, in the current spending climate, the Government’s primary concern is to reduce the £84 million annual cost of the employment tribunal system to the Treasury.

For more information, see XpertHR’s coverage of this topic.

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