UNISON’s employment tribunal fees challenge dismissed, but impact of new regime not yet apparent, says High Court

Out-Law News | 10 Feb 2014 | 10:54 am | 4 min. read

A trade union ’ s legal challenge to the introduction of fees to bring a case to an employment tribunal has been dismissed by the High Court.

A trade union’s legal challenge to the introduction of fees to bring a case to an employment tribunal has been dismissed by the High Court.

However, Lord Justice Moses noted that it was too early for UNISON to prove that the new regime breached certain principles of European law. He said that the union would be able to challenge the fees in future if they prevented vulnerable workers and those with ‘protected characteristics’ from claiming against their employers.

“The fundamental flaw in these proceedings is that they are premature and that the evidence at this stage lacks that robustness necessary to overturn the regime,” he said in his judgment.

“We would underline the obvious: there is no rule that forbids the introduction of a fee regime. The nature of that regime is closely dependent upon economic and social considerations and policy. The formation of such policies is itself dependent upon an accurate assessment of income and expenditure and the means of those who wish to use the Tribunal system, and in the light of the need to encourage challenges to discrimination in pursuit of the important goal of equality. This court did not find itself in any position accurately to collate the information, still less the evidence, in order to achieve a just resolution,” he said.

He noted that the Lord Chancellor was “under a duty” to keep the scheme under review and to take “remedial measures” to remove any disproportionate effects on protected groups. In addition, by noting “publicly and in court” that the union’s claim was premature, he would not be able to object to a future challenge to the fee regime on the grounds that it was being brought too late.

The UK’s largest union has said that it will “fight on” and take its “very strong arguments into the Appeal Court”.

Fees to bring a claim to an employment tribunal or the Employment Appeal Tribunal (EAT) were introduced on 29 July 2013. 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’ claim, with fees of £160 and £230; and ‘Type B’ unfair dismissal or discrimination claims, with fees of £250 and £950. Flat fees apply to EAT cases. A remission system operates to exempt people on low incomes from having to pay the full fees.

UNISON has argued that the introduction of fees breaches the ‘principle of effectiveness’ under EU law by making it excessively difficult or virtually impossible for workers to exercise their rights. In addition, it has claimed that the Government’s impact assessment on the new regime was flawed as it did not properly consider the potential adverse effect of introducing fees on public sector workers with protected characteristics, as required by the Public Sector Equality Duty.

The High Court considered the impact of the fees regime on a number of hypothetical claimants with different incomes, savings and financial commitments. It concluded that the regime provided “sufficient opportunity even for families on very modest means … to accumulate funds”, with proceedings likely to be “expensive but not to the extent that bringing claims will be virtually impossible or excessively difficult”. It also found that the Public Sector Equality Duty had not been breached, and the required consultation had taken place.

The court was most convinced by UNISON’s argument that those who fall within ‘protected’ classes, and were therefore more likely to be bringing discrimination and unfair dismissal claims, would incur “significantly higher fees”. However, again it found that it was “not possible at this stage to form any clear view to the weight of the impact of the introduction of the scheme”. If challenged at a later date, the Government could still be able to objectively justify higher fees for Type B claims, but it would not be possible or appropriate for the court to consider justification before the “extent of the disparate impact” was known, it said.

Employment law expert Christopher Mordue of Pinsent Masons, the law firm behind Out-Law.com, said that UNISON was correct to highlight the significant reduction in the number of employment tribunal claims brought since the fee regime was introduced. However, he said that this downturn was really a product of the initial fees required to start a claim. The impact of the further fees required to progress to a full hearing remained to be seen, he said.

“In this decision, the High Court suggests that tribunals should only require that fee to be paid once witness statements have been exchanged so that the claimant can use that evidence to assess the strength of the case and decide whether to continue,” he said. “However, preparation of witness statements can be one of the most time-consuming and costly stages of the case and exchange often occurs only shortly before the hearing date. Once that stage is reached, employers will have incurred the bulk of their legal costs in defending the claim.”

“This highlights one of the key weaknesses in the employment tribunal system for employers - in the vast majority of cases there are no costs awards against claimants if the case is withdrawn or fails. As mentioned in the decision, the median awards for race discrimination between 2011 and 2012 were £5,356, and £6,746 for sex discrimination. The cost of defending claims is therefore very often disproportionate to the awards likely to be made even if the claim succeeds,” he said.

He said that without “a fundamental change in the costs rules in employment tribunals”, the system would remain weighted against smaller employers in particular.

“As long as claimants can just walk away from the litigation without a cost sanction, employers will continue to feel that the system creates a vicious circle - encouraging speculative claims made in the hope of a settlement, while also pressuring employers to settle claims to avoid the inevitable costs of defending the claim,” he said.