Supreme Court holds that Employment Tribunal Fees Regime is Unlawful
Yesterday’s Supreme Court judgment held that the fees regime in the Employment Tribunal system was unlawful, and has been unlawful ever since its introduction in 2013. The seven Supreme Court judges were unanimous in reaching this conclusion, on a number of grounds including because:
- Its practical impact, was to remove effective access to justice, particularly for low to middle income households, and this made it fundamentally unconstitutional under UK law;
- Removing effective access to justice meant it also had the practical effect of ‘cutting down’ statutory rights granted under Acts of Parliament;
- The fees structure (a flat rate levy according to the type of claim lodged) was also unlawful under principles recognised by EU law, particularly the ‘proportionality’ principle;
- It also amounted to an act of unlawful indirect discrimination - against those most likely to need access to the tribunal system to obtain a remedy for discrimination.
The Supreme Court judges characterised the problems with the fees regime as “systemic”, not confined to “exceptional circumstances”. They were highly critical of the arguments put forward on behalf of the Lord Chancellor in support of the fees regime, describing some of those arguments as “demonstrably untenable” and even “absurd”. The judgment particularly noted that the existing regime was most likely to deter those from low to middle income households from bringing tribunal claims, and said that it was wrong to characterise access to the court and tribunal system as just another ‘economic good’, the benefit of which accrues only to those bringing claims. Criticism was also directed at the arrangements for granting remission from fees. The judgment spells out in clear terms the wider benefits accruing to society from ensuring access to the court and tribunal system, not least of which include the effective operation of the rule of law.
In relation to the arguments put forward around the affordability of the fees regime, some of the points raised had already been considered in the EAT and Court of Appeal. The Supreme Court judges held that earlier judgments had applied too high a test. While the Court of Appeal had concluded that it was necessary to show the fees regime made access to the tribunal “impossible” before the system could be regarded as unlawful, the Supreme Court judges said the issue of affordability (and therefore access to justice at a practical level) must be considered by looking at “the likely impact… on behaviour in the real world. Fees must therefore be affordable not in a theoretical sense, but in the sense that they cannot reasonably be afforded.” They took into account evidence from the Joseph Rowntree Foundation about what sort of expenditure was regarded as reasonably necessary today in order to “meet acceptable living standards” and held it was wrong to expect low to middle income households to sacrifice “ordinary and reasonable expenditure for substantial periods of time” in order to be in a position to pay tribunal fees. They held that if such households “can only afford the fees by sacrificing the ordinary and reasonable expenditure required to maintain what would generally be required as an acceptable standard of living, the fees cannot be regarded as affordable”.
What does this mean in practical terms?
What is important to understand is that this judgment does not mean Tribunal fees are unlawful per se. The case is, very specifically, about the particular fees regime introduced in the employment tribunals in 2013. It is entirely open to the government to implement a different regime which addresses and takes appropriate account of the numerous criticisms levelled at the current arrangements. A more nuanced formulation of fees, rather than flat rate and/or a more generous remission scheme may be sufficient to address the criticisms. Indeed the Supreme Court judgment specifically anticipated an amended regime when it expressed the view that setting fees at a lower level might increase the total fees revenue generated.
What is not in doubt is that the fees system must change. It seems highly likely the government will retain a fees system but amended to address the criticisms. It may wish more closely to mirror the system in the civil courts where fees are calculated based on the value of the claim.
There is also the issue of what to do about fees paid by claimants since 2013 – if the payments were imposed unlawfully, they will need to be refunded. Whether employers ordered to reimburse fees paid by a successful claimant will also be refunded is a more open question.
And what should be done about prospective claimants who were deterred from bringing claims because of unlawful fees? There is a real prospect that many claimants will seek now to bring aged claims out of time, seeking to justify their delay on the fees regime. Particularly in discrimination cases, where the “just and equitable” test will be applied, such arguments may be regarded sympathetically. Even in unfair dismissal cases, where the test applied will consider whether it was ‘reasonably practicable’ for the claim to have been lodged in time (usually regarded as a stricter test) the Supreme Court judgment is quite clear that the fees system did operate as a bar to effective participation in the tribunal system and, as indicated above, in many cases was simply not reasonably affordable by prospective claimants. Failure to pay the required fee operated as an absolute bar to acceptance of a claim, so it appears potentially arguable (subject to an assessment of their income at the relevant time) that it was not ‘reasonably practicable’ for those claimants for whom the fees was not reasonably affordable to have lodged their claims in time.
More immediately, we understand that Employment Tribunals have already ceased requiring the payment of fees before accepting claims. It will also be interesting to see whether the massive decline in the numbers of claims (a fall of around 70%) recovers. The judgment noted that those claimants who had been most deterred by the fees system from bringing their claims were disproportionately those with claims of low value, such as for small unlawful deduction sums, or of no financial value, such as for a declaration as to their terms and conditions, or in relation to rest breaks. Changes must now be made as a result of the Supreme Court judgment and it seems inevitable they will lead to an increase in claims. Employers should therefore expect an increased willingness by employees to access the tribunal system, although whether claim numbers ever recover to their pre-2013 levels remains to be seen.
Posted on 27/07/2017 in Legal UpdatesBack to Knowledge