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Priced out of justice

18 September 17

The UK Supreme Court judgment on employment tribunal fees has boosted the principle of access to justice. Our feature considers how the court reached its decision, and some practical consequences

by Dawn Robertson

When the proposal to charge fees in employment tribunals was first announced in 2012, the Law Society of Scotland expressed great concern from an access to justice perspective. So, for the Supreme Court to declare such fees unlawful for just that reason is obviously very satisfying.

Judicial review as a vehicle for redress has recently been severely curtailed through legislative change. But this decision highlights the need for such a process to review administrative action and to rectify injustice.

In 2012 our primary concern was that a fundamental change of policy was decided without any explanation for the change and without any evidence to support the need for such change. That it was undertaken by a mere change in rules of procedure rather than by primary legislation seemed to us to lack the transparency of executive decision making to which we believed our citizens were entitled in a modern democracy. We particularly highlighted that the consequences of fee charging would be disproportionately adverse for employees, and so detrimental to access to justice. Those concerns were not shared by Government.

In 2014, when statistics emerged of the impact of fees on applications to employment tribunals (an 81% drop in the number of claims accepted in the last quarter of 2013-14, after the fees were introduced), it seemed clear that the concerns of 2012 had been vindicated. The employment tribunal system has worked well throughout its history, offering an impartial tribunal to resolve workplace disputes. The relationship between employer and claimant is often imbalanced, and having a system which serves both parties effectively is crucial in the interests of fairness. Fee charging significantly reduced the effectiveness of that system.

It is Government that exercises power, and only very rarely is such power curtailed by the courts. This decision therefore is a triumph for the ordinary worker in the street, and I am very pleased indeed at the outcome. In this case UNISON, the union which sponsored the applicant, is to be commended for its support for the applicant and for access to justice in general. As the Society stated when the judgment was announced: “We wholeheartedly welcome this.”

Above all, the judgment reiterates the importance of access to justice to a fair and just society. But it is important to note that the Supreme Court acknowledged that the reasons for introducing tribunal fees were and continue to be legitimate. The issue in this case was the level of fees imposed. For fees to be lawful, they must be set at a level that everyone can afford, taking into account the remission scheme available. The Supreme Court did not accept that this was the case under the current scheme. If the Government remains committed to the principle of fees, it could introduce a new scheme structured in such a way that it could not be viewed as preventing access to justice. It is likely, however, no doubt learning from failures in 2012, that it would want to enter into a period of consultation beforehand to ensure that all possible measures are taken to prevent any revised scheme falling foul of this ruling.

I am sure that the Society, fulfilling its duties with regard to its public role in Scotland, will carefully monitor future developments and participate in any such consultation. This will be of greater importance once the transfer of the employment tribunal system to Holyrood takes place.Almost four years to the day since they were implemented, in R (on the application of UNISON) v Lord Chancellor [2017] UKSC 51 (26 July 2017), the UK Supreme Court ruled that the fees introduced into the employment tribunals and Employment Appeal Tribunal were unlawful from the outset. The decision is an important one with potentially significant and far reaching consequences. 

Rationale for the fees

The Employment Tribunals and the Employment Appeal Tribunal Fees Order 2013 (SI 2013/1893) introduced a new regime, from 29 July 2013, in terms of which employment tribunal (ET) claimants and Employment Appeal Tribunal (EAT) appellants were liable to pay a fee in order to bring claims and appeals, unless they qualified for fee remission.

Under the Government’s 2011 paper, Resolving Workplace Disputes: A Consultation, fees were seen to be desirable for three reasons:

  • fees would help to transfer some of the cost burden from taxpayers to users of the system;
  • fees could incentivise earlier settlements;
  • fees could act as a disincentive for unreasonable behaviour, specifically the pursuit of weak or vexatious claims.

Although a couple of different approaches were considered, the Government ultimately opted to base the fee on the subject matter of the claim, and its complexity – complex cases take up more resources and should be charged accordingly. As such, the Fees Order identified “type A” and “type B” claims, prescribing an issue fee and hearing fee for each type, totalling £390 in respect of type A claims and £1,200 for type B. Fees in respect of group claims varied according to the type of claim and number of claimants. EAT fees amounted to £1,600 for appellants, whether an individual or a group. It should be noted that there was no automatic right of successful claimants to recover fees.

According to the consultation paper, the main purpose was to transfer part of the cost burden to users of the system, but not to prevent claims from being brought by making it unaffordable for those with limited means. It noted that the impact of fees on the number of claims was difficult to forecast, but analogous research relating to civil court fees indicated that the impact would be relatively minimal: in other words use of the service would not be highly price sensitive.

In order to introduce the Fees Order, it was first necessary to give the Lord Chancellor the power to prescribe fees in the ETs and EAT. This was done by bringing those fora within the ambit of s 42(1) of the Tribunals, Courts and Enforcement Act 2007. While the Act gave the Lord Chancellor the power to introduce tribunal fees, it did not give unlimited power to do so and, even where a statutory power authorises an intrusion on the right of access to the courts, it is interpreted as authorising only such a degree of intrusion as is reasonably necessary to fulfil the objective of the provision in question. Creating a real risk that persons will effectively be prevented from having access to justice will result in the secondary legislation being ultra vires.

The Fees Order had an immediate impact. Initial figures suggested that the number of ET claims being brought fell by 79%. The evidence available to the Supreme Court was “that there has been a long-term reduction in claims accepted by the ETs of the order of 66-70%” (para 39).

Before the lower courts

The first judicial review claim was lodged by UNISON in June 2013. It sought to have the Fees Order quashed on the following grounds:

  • that it breached the EU principles of effectiveness and equivalence (“the effectiveness ground”);
  • that it was brought into force in breach of the public sector equality duty imposed by the Equality Act 2010, and was indirectly discriminatory (“the discrimination ground”).

The Divisional Court ([2014] EWHC 218 (Admin)) dismissed the claim on the grounds that the proceedings were premature and the evidence not sufficiently robust to sustain the grounds of challenge. Permission to appeal was sought, and granted in respect of the effectiveness ground, but proceedings were adjourned to permit fresh proceedings taking account of new evidence, and a second claim was lodged in September 2014, based on the same grounds. The Divisional Court, including the former President of the EAT, Elias LJ, dismissed the claim but this time granted UNISON permission to appeal on both grounds. The two appeals were joined.

In relation to both grounds the arguments before the Court of Appeal were based on EU law. The court dismissed the appeal: [2015] EWCA Civ 935. Underhill LJ, with whom Moore-Bick and Davis LJJ agreed, considered that the imposition of a fee would not constitute an interference with the right of effective access to a tribunal under EU law unless it made it impossible in practice to access the tribunal. That depended not on whether the payment of the fee would be a sensible use of money but whether the fee was unaffordable (para 45 of the judgment). As such, only evidence of the actual affordability of the fees in the financial circumstances of typical individuals could support a reliable conclusion that the fees were realistically unaffordable in some cases. The discrimination ground was also rejected.

The case heard by the Supreme Court was argued primarily on the basis of the common law right of access to justice, diverging somewhat from the arguments before the lower courts. In addition, the court permitted a further ground challenging the lawfulness of the Fees Order to be advanced, namely that it had the effect of frustrating the operation of a variety of statutory provisions. 

Access to justice explained

Lord Reed’s judgment delivers the Supreme Court’s decision on the primary issue of whether the fees were unlawful because of their effect on the right of access to justice under both domestic and EU law, while Lady Hale’s judgment addresses whether the fees were unlawful as a result of indirect discrimination.

As well as giving the principal decision of the court, Lord Reed’s judgment combines a tutorial in constitutional law with a brief exposition of what he refers to as “elementary economics”. The right of access to justice “is not an idea recently imported from the continent of Europe, but has long been deeply embedded in our constitutional law” (para 64). For the fees to be lawful, they have to be set at a level that everyone can afford, taking remission into account (para 91). The evidence before the Supreme Court was that that requirement was not met. The court does not require conclusive evidence, rather it is sufficient if a real risk is demonstrated.

Lord Reed goes on to state that, although conciliation can be a valuable alternative, the ability to obtain a fair settlement is dependent on the possibility that, in the absence of such a settlement, a claim will be presented to the ET. In contrast to the Court of Appeal, the Supreme Court allowed examples of hypothetical claimants to demonstrate circumstances in which the fees could not be regarded as affordable to households on low to middle incomes.

Lord Reed was also careful to point out that it is not only where fees are unaffordable that they can prevent access to justice. They can also have that effect if they “render it futile or irrational” to bring a claim. Many ET claims do not seek a financial award, for example claims to enforce certain rights such as to written particulars of employment. Additionally, many claims are for modest amounts which no sensible person would pursue unless they could be guaranteed success and reimbursement of fees. The approach elsewhere in the civil court system, that costs generally follow success, has never applied in ETs as a result of the traditional view that they should be an inexpensive forum for settling workplace disputes. As such, recovery was not guaranteed even in the case of successful claims.

In all the circumstances, his Lordship held that the Fees Order effectively prevented access to justice and was therefore unlawful. Further, given the conclusion that the fees imposed were in practice unaffordable by some people and, in effect, pointless for others, the order imposed disproportionate limitations on the exercise of EU rights, and therefore was unlawful under EU law also.

Lady Hale’s judgment, by comparison, is brief. While it was unnecessary to decide the issue, given the court’s decision on access to justice, she considered that the order was indirectly discriminatory under s 19 of the Equality Act 2010. Type B claims attracted a higher fee than type A claims and a higher proportion of women bring type B claims, therefore women were placed at a particular disadvantage compared with men. This “disparate impact” on women had not been shown to be justified as a proportionate means of achieving the Government’s stated aims (para 134).

What next?

The decision of the Supreme Court renders the Fees Order quashed with immediate effect. Steps have already been taken by HM Courts & Tribunals Service (“HMCTS”) to remove the fee charging elements of the ET and EAT process.

Given the narrative in the judgments, it is possible that the Lord Chancellor will, in due course, seek to introduce a significantly altered charging regime. The notion of charging, per se, was not seen as the problem by the court. Rather, it was the arbitrary nature of the fees which was criticised, both in terms of determining that, in effect, claimants with more complex cases should be charged more (in effect penalising those claimants), and in terms of fee levels being set without reference to the monetary (if any) value of the claim, affordability and the price elasticity of demand.

The Presidents of Employment Tribunals in England & Wales and in Scotland have issued almost identical case management orders setting out the position in light of the decision:

  • So far as is necessary, applications for reimbursement of fees, however paid or by whom, shall be made in accordance with administrative arrangements to be announced by the Ministry of Justice and HMCTS shortly.
  • So far as is necessary, applications for reinstatement of claims (of whatever kind) rejected or dismissed for non-payment of fees shall be made in accordance with administrative arrangements to be announced shortly.
  • All other claims or applications brought to the ET in reliance on the Supreme Court’s decision shall proceed to be considered judicially in accordance with the appropriate legal and procedural principles in the usual way.
  • Any party or representative wishing to make representations for the further conduct of such claims or applications should do so on application to the President.

It is clear that steps will be taken to reimburse tribunal fees, whether paid by claimants or “reimbursed” by respondents under a tribunal award. Of greater complexity is how the ET will deal with claims previously rejected or dismissed as a result of non-payment of fees under rules 11 and 40 of sched 1 to the Employment Tribunals (Constitution and Rules of Procedure) Regulations 2013.

In terms of unfair dismissal, tribunals may also expect to see some claims being presented well after the expiry of the usual three months (from the effective date of termination), on the ground “that it was not reasonably practicable for the complaint to be presented before the end of that period of three months” (Employment Rights Act 1996, s 111(2)(b)). Alternatively, consideration may be given to litigation by “wannabe” claimants who were, in their view, denied their right to make such a claim because of the tribunal fees.

Early conciliation, anyone?

Since 6 May 2014, it has been mandatory for most prospective claimants to complete and send an early conciliation form to Acas before a valid tribunal claim can be lodged. The process was intended to provide claimants and indeed respondents with a forum for early resolution of disputes such that more claims would be resolved without the need for recourse to the ET (or therefore payment of ET fees). The difficulty in practice has been persuading prospective respondents to enter into this process in a meaningful way when, for the reasons outlined by Lord Reed, the likelihood of an actual claim being lodged was in many cases low. The “wait and see” approach was adopted in all but the rarest of cases. Whether the Supreme Court’s decision will have any bearing on the continuance of mandatory early conciliation is anyone’s guess. Clearly, however, consideration will need to be given to its merits and demerits as and when the Ministry of Justice carries out its review following the decision. 

Going forward

In light of its success in this case, it will be interesting to see whether UNISON or one of the many equal rights focused organisations uses the impetus gained to challenge the two year qualifying period for unfair dismissal claims, challenged during the 1990s on the grounds that it was indirectly discriminatory against women and held by the House of Lords to be lawful on the basis that the disparate impact between men and women was “objectively justified”. Reduced to one year, in 1999, under Tony Blair’s Labour Government, it is somewhat surprising that it has not been challenged since its reintroduction, in 2012, by the coalition Government. Arguably, there will never be a better time for such a challenge to be made.

It is, of course, too early to know the full impact of the Supreme Court’s decision. Although one would expect tribunals to see an upturn in claims, the ongoing erosion of employment rights via the gig economy and the aforementioned two year qualifying period may mean that the impact is significantly less than it would otherwise be.

Regardless, it is interesting that, at the end of the day, it was the application of the common law right of access to justice that Lord Reed focused on to administer the fatal blow to the Fees Order, notwithstanding that it appears that, initially, none of the lawyers involved in the case thought to found on it.

Dawn Robertson is a partner with Harper Macleod LLP, Edinburgh, and an accredited specialist
in employment law

A welcome intervention

The Society wholeheartedly welcomes the decision as underlining the importance of access to justice

When the proposal to charge fees in employment tribunals was first announced in 2012, the Law Society of Scotland expressed great concern from an access to justice perspective. So, for the Supreme Court to declare such fees unlawful for just that reason is obviously very satisfying.

Judicial review as a vehicle for redress has recently been severely curtailed through legislative change. But this decision highlights the need for such a process to review administrative action and to rectify injustice.

In 2012 our primary concern was that a fundamental change of policy was decided without any explanation for the change and without any evidence to support the need for such change. That it was undertaken by a mere change in rules of procedure rather than by primary legislation seemed to us to lack the transparency of executive decision making to which we believed our citizens were entitled in a modern democracy. We particularly highlighted that the consequences of fee charging would be disproportionately adverse for employees, and so detrimental to access to justice. Those concerns were not shared by Government.

In 2014, when statistics emerged of the impact of fees on applications to employment tribunals (an 81% drop in the number of claims accepted in the last quarter of 2013-14, after the fees were introduced), it seemed clear that the concerns of 2012 had been vindicated. The employment tribunal system has worked well throughout its history, offering an impartial tribunal to resolve workplace disputes. The relationship between employer and claimant is often imbalanced, and having a system which serves both parties effectively is crucial in the interests of fairness. Fee charging significantly reduced the effectiveness of that system.

It is Government that exercises power, and only very rarely is such power curtailed by the courts. This decision therefore is a triumph for the ordinary worker in the street, and I am very pleased indeed at the outcome. In this case UNISON, the union which sponsored the applicant, is to be commended for its support for the applicant and for access to justice in general. As the Society stated when the judgment was announced: “We wholeheartedly welcome this.”

Above all, the judgment reiterates the importance of access to justice to a fair and just society. But it is important to note that the Supreme Court acknowledged that the reasons for introducing tribunal fees were and continue to be legitimate. The issue in this case was the level of fees imposed. For fees to be lawful, they must be set at a level that everyone can afford, taking into account the remission scheme available. The Supreme Court did not accept that this was the case under the current scheme. If the Government remains committed to the principle of fees, it could introduce a new scheme structured in such a way that it could not be viewed as preventing access to justice. It is likely, however, no doubt learning from failures in 2012, that it would want to enter into a period of consultation beforehand to ensure that all possible measures are taken to prevent any revised scheme falling foul of this ruling.

I am sure that the Society, fulfilling its duties with regard to its public role in Scotland, will carefully monitor future developments and participate in any such consultation. This will be of greater importance once the transfer of the employment tribunal system to Holyrood takes place.

Stuart Naismith is convener of hte Law Society of Scotland's Access to Justice Committee 

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