Smith Commission reforms could facilitate employment tribunal forum shopping, warns expert

Out-Law News | 28 Nov 2014 | 3:22 pm | 3 min. read

Businesses operating across the UK but headquartered in Scotland could have to defend themselves in disputes with English or Welsh workers before employment tribunals in Scotland under the Smith Commission reforms, an expert has said.

Employment law specialist James Cran of Pinsent Masons, the law firm behind Out-Law.com, said that the devolution of some powers relating to employment tribunals could result in the Scottish government removing the existing requirement that employees pay a fee to bring cases before employment tribunals.

Cran said that this could result in a rise in the number of claims being brought against employers in Scotland, and further warned that jurisdictional guidelines might allow workers based elsewhere in the UK to bring a case before an employment tribunal based in Scotland instead of their local tribunal so as to avoid paying a fee, he said.

On Thursday, Lord Smith of Kelvin published his report outlining plans for further devolution (28-page / 400KB PDF) of powers to Scotland.

The power to set income tax rates and bands and to borrow more money will be devolved to the Scottish Parliament and government under the plans. Among the other powers to be devolved includes "all powers over the management and operation of all reserved tribunals ...  other than the Special Immigration Appeals Commission and the Proscribed Organisations Appeals Commission".

"There is widespread opposition within the main political parties in Scotland to current rules that require employees to pay a fee to raise a claim against their employer before an employment tribunal," Cran said. "Giving Scotland broad powers over 'the management and operation' of tribunals could see the next Scottish government act to abolish those fees. This could have implications for national employers with operations across the rest of the UK."

"Jurisdictional rules for bringing claims before an employment tribunal in Scotland could facilitate so-called 'forum shopping' by employees if the company they work for has operations in Scotland. This risk would be particularly acute if those workers face paying a fee to bring a claim before an employment tribunal in England or Wales but could submit the same claim for free in Scotland," he said. "The travel costs of attending any hearings might put non-Scotland based employees off but they might be tempted to bring a 'free' claim in the hope of settling before any hearing."

Under the Employment Tribunals (Constitution and Rules of Procedure) Regulations, claims can be brought before employment tribunals in Scotland if an employer "resides or carries on business in Scotland", if "one or more of the acts or omissions complained of took place in Scotland", if "the claim relates to a contract under which the work is or has been performed partly in Scotland" or "the Tribunal has jurisdiction to determine the claim by virtue of a connection with Great Britain and the connection in question is at least partly a connection with Scotland".

Cran said that, under the new powers being devolved to Scotland, Scottish employment tribunals would have jurisdiction to hear cases brought by workers based outside of Scotland whose employer is headquartered in Scotland. He said it was at least arguable that the tribunals would similarly have jurisdiction to hear claims from non-Scottish workers whose employers have an office, but not headquarters, in Scotland.

Last year, new rules were introduced that require employees to pay a fee to bring a claim before an employment tribunal. The rules were identified by the UK government as one of the ways in which to deter spurious claims being brought before the employment tribunals.

Under the new structure, parties have to pay an upfront fee to raise a claim followed by a further 'hearing fee' once the case is referred to a tribunal. Claim types are subdivided into the administratively simple 'Type A' claims, with fees of £160 and £230; and 'Type B' unfair dismissal or discrimination claims, with fees of £250 and £950. Flat fees apply to employment appeal tribunal cases. A remission system operates to exempt people on low incomes from having to pay the full fees.

The fees regime is currently the subject of a legal challenge from the trade union UNISON, which has argued that requiring employees to pay a fee to bring a claim against their employer reduces access to justice and that the fees particularly disadvantage lower paid workers and so indirectly discriminate against women and ethnic minorities.

In June, Scottish minister for legal affairs Roseanna Cunningham said that the Scottish government had written to the UK government ahead of the new fees regime being introduced "making clear the Scottish government’s opposition to the new measures". Cunningham said that she "would be surprised if any future Scottish government of any kind would think that such fees are at all appropriate".

Both Scottish and UK Labour also oppose fees, with former Scottish Labour leader Johann Lamont previously calling the charge a tax on justice. Shadow UK business secretary Chuka Umunna earlier this year described the system of tribunal fees as "unfair" and said the Labour Party would "abolish the current system ... and put in place a new system which ensures all workers have proper access to justice".

According to figures published by the Ministry of Justice in September, the number of claims lodged with all UK tribunals fell by 71% in a year, driven primarily by reductions in "social security and child support appeals and employment claims".