The end of employment tribunal fees – What’s the impact for employers?

Posted on: July 27th, 2017

With the news that the UK Supreme Court declared Employment Tribunal fees unlawful on July 26th we take a look at what that means to employers.

What’s the impact for employers?

  • Increased employment tribunal claims: Particularly taking into account the publicity surrounding this decision, employers’ risk of facing employment tribunal claims will increase with immediate effect. Employers should particularly be mindful of:

    – Claims bought by employees with less than 2 years service, for example those employees dismissed during their probationary period. These have been rare in recent years; however the removal of fees means employees may be more willing to raise the previously higher fee attracting discrimination or whistleblowing arguments and bring claims despite short service.

    – Claims bought by employees that have recently been dismissed – this decision has immediate effect. If employers have recently taken a risk on a dismissal, because they think the employee is unlikely to bring a claim due to fees, these decisions should be reviewed.

    – Lower value claims – recently employers have been fairly safe from low value claims, from employees with low salaries, or who have quickly found other employment reducing their losses. The removal of fees means that these claims will again be a risk.

Employers should take legal advice sooner rather than later when faced with a request for ACAS Early Conciliation or a contentious appeal to reduce the risk of claims as far as possible.

  • Reduced bargaining position in settlement negotiations – Under the fees system, employers faced with a request to conciliate were rightly tempted to see if an employee proceeded to issue a claim and pay the fee before engaging in settlement discussions. Now, employees will have an increased bargaining position and are less likely to settle for a low value at an early stage. This will impact on the level of offers made under settlement agreements and during the early conciliation process.
  • Increased trade union activity – this is a clear victory for Unison and demonstrates the benefit that trade unions can deliver to employees. It is likely that the surrounding publicity will lead to an increase in trade union membership as a whole, in turn increasing employees’ access to support in bringing Employment Tribunal claims. It will also reduce the costs to unions in bringing multiple claims for employees, such as those on worker status, as they’ll no longer have to pay the fees on employees’ behalf.
  • Increased insurance premiums – in the longer term as markets adjust employers may see increases in their legal expenses insurance if they face more claims (meaning their case history increases their premiums) or insurers as a whole face higher costs
  • Increased legal challenges – The decision that fees have always been unlawful opens up arguments for employees that they should now be able to bring historic claims that they were not able to pursue at the time because they couldn’t afford the fee. The Supreme Court’s decision did not touch on this area, and there will therefore inevitably by further cases on this issue, which employers should watch out for. 
  • Delays in the Employment Tribunal system – This decision will have caused turmoil in the Employment Tribunal system. It now faces two challenges – firstly, adapting its systems to remove the requirement to pay a fee and dealing with refund requests, and secondly dealing with an influx of claims. The drop in claims over the last 4 years has meant Employment Tribunals have been stripped to the bare bones. We expect lengthy delays for some time to come whilst the Employment Tribunal recruits and adjusts to the decision.  This will also result in delays in the ACAS Conciliation service, which will face the same problems.

We will keep you updated as we start to see the true impact of this decision anecdotally and in the Employment Tribunal statistics.

What is the future for employment tribunal fees?

In the longer term, this is a (rather large) bump in the road rather than necessarily the end for Employment Tribunal fees. The problem for the Government was the level of fees and the way they were implemented.  The Supreme Court acknowledged that other fee systems could and do work. The Government has already successfully introduced charging in other courts, for example, the system in the small claims court where fees are based on the total value of claims and start from as low as £50.

In the longer term, we expect that the Government will start a consultation process to introduce an alternative system that takes into account the issues identified. This is not going to be straightforward given the slim majority held by the Conservatives and Labour’s clear stance against fees. Given the current focus on Brexit this may slip down on the priority list for now. It will be hard for the Government to come up with a system that addresses the issues the Supreme Court identified, or the unique nature of Employment Tribunal claims.

If fees are re-introduced this is likely to be a more nominal fee, or fees payable only for higher value claims. This may also include reciprocal fees being paid by employers, for example if the claim proceeds to a hearing, or on responding to a claim. This would level the playing field for employers and employees, giving an incentive for both to enter into settlement discussions sooner.

Is this decision affected by Brexit?

No. We are used to the higher courts challenging the Government on their compliance with EU law. This case was different. Although the Supreme Court decided that the fees were also incompatible under European Law, the main basis of the decision was that the fees were contrary to fundamental English law principles.

The decision is therefore Brexit proof.

What’s the process for reclaiming fees paid?

The Employment Tribunal will be frantically working on this right now. The Government committed to repaying the fees if they lost this challenge back in 2013 so we would hope they have a plan in place..

This is likely to involve employees being required to submit evidence of the fees paid before repayment will be made. Complications will arise in cases where the employer has then been ordered to pay the fees, or these have been paid by insurers on employees’ behalf.

We expect a separate announcement on the process in due course and will send a further update once this is available.