With yesterday’s landmark ruling by the Supreme Court that Employment Tribunal fees are unlawful, our Employment law experts take a look at the history – and what this decision means for both individuals and businesses.

The Employment Tribunal system was created in 1964. Until July 2013, individuals were not required to pay any fees to bring a claim to the employment tribunal.

Employers had, for a long time, raised concerns about the system. Many argued that it did not discourage vexatious or weak claims that had no reasonable prospects of being successful.

Unless there are exceptional circumstances, unsuccessful claimants are not required to pay legal fees, so employers are left out of pocket – whether or not the claimant was successful – as they have to pay their own administrative and legal fees in defending claims.

The Government’s reasons for introducing the Employment Tribunals fee system was threefold:

  • To bring in a fee structure to Employment Tribunal claims to reduce the cost of tax payers’ money being spent on running the Employment Tribunals in the UK
  • To place the Employment Tribunals on similar footing to the Civil Courts, which have for a long time had a fee structure in place charging litigants for using the system
  • To discourage weak or vexatious claims being brought to the Employment Tribunal, and to promote other forms of conciliation such as ACAS and alternative forms of mediation, promoting early settlement.

In its December 2011 Consultation paper, the Government reported that, in the financial year 2010/2011 alone, the cost of running the Employment Tribunals regime cost tax payers £84.2 million.

In 2013, the Government introduced a fee structure under The Employment Tribunals and the Employment Appeal Tribunal Fees Order 2013 (Fees Order). From then on, employees and workers bringing a claim against their employers would have to pay Tribunal fees to do so. The level of fees payable was dependent on the type claim being brought and there would an issue fee and a hearing fee.

Type A claims for breach of contract, unpaid wages, equal pay, holiday pay and redundancy pay would cost a total of £390 if they went to a full hearing.

Type B claims involving discrimination, unfair dismissal and detriment would cost a total of £1,200 if they went to a full hearing.

Impact of the new fee system

The Government’s review of the introduction of fees in the Employment Tribunals (January to March 2017) found that the new fee regime had broadly met the Government’s objectives. But, at the same time, it found a 67% decline in cases being submitted to the Employment Tribunal – a much sharper decline than expected. This suggested that the fee regime may have been acting as a deterrent to potential claimants, preventing them access to justice.

The fee regime also had a particular impact on small claims. For example, if someone wanted to claim £500 for unpaid wages, they would need to pay £390 in fees if the claim went to a full hearing. The fees were a major disincentive for those people pursuing small claims. This was compounded by the fact that there is a poor pay-out rate even where claimants are successful.

Judicial review

Unison initiated a judicial review of the Employment Tribunals fee system, arguing that the regime was unlawful and discriminatory.

Despite receiving negative judgments from both the High Court and the Court of Appeal, Unison continued in its quest to challenge the legality of the system. Unison’s appeal reached the Supreme Court - the UK’s highest court - who gave their judgement yesterday.

The Supreme Court unanimously ruled that the Employment Tribunals fee structure was unlawful and discriminatory – in breach of both UK and EU Law - and is, therefore, invalid.

Lord Reed held that the Employment Tribunals Fee regime was unlawful under common law. It restricted access to justice, as not everyone could afford to pay the fees. It was also unlawful under EU Law (Article 6 ECHR – Right to a fair trial) as the fees were not justified as a necessary intrusion on peoples’ right of access to the courts.

Lady Hale agreed. She went on further, to say that the Fees Order was also indirectly discriminatory against people with a protected characteristic – namely women. The Fees Order was not justified as a proportionate measure to achieving the Government’s proposed legitimate aims.  

The Employment Tribunals and the Employment Appeal Tribunal Fees Order 2013 has therefore been held to be unlawful and, consequently, invalid.

Immediate consequences of decision

Firstly, from immediate effect, people won’t need to pay for lodging their claims with the Employment Tribunal.

However, it is unlikely that the fees regime will be entirely abolished. It is expected that the Government will amend the fees regime to make it lawful. For example, they might reduce the level of fees to a low enough level that still enables access to justice, but high enough to assist the Exchequer in running the tribunal system and deterring unmeritorious claims.

Until such changes come in to force, people can submit claims to the Employment Tribunal without having to pay any fees. It is highly likely that there will be a sharp increase in number of people bringing claims to the Employment Tribunal – especially in an effort to avoid any new fee regime which might come into force.

Secondly, the Supreme Court made clear in its judgement that all fees paid since the Fees Order came in to force will have to be refunded. It has been estimated this could cost the Government in the region of £32 million.

Thirdly, it raises a question about what will happen to those who did not bring a claim because they could not afford it. Will the Tribunals allow people to bring claims out of time, on the basis that they were unlawfully restricted from doing so within the requisite time periods?

There are limited circumstances in which a Tribunal will extend the time limits and allow out of time claims to proceed. Not only will the claimant need to establish the legal basis on which the extension should be granted, it is likely that they will need to demonstrate that they attempted to bring a claim, but were unable to do so due to the level of fees they were required to pay. For example, after being unsuccessful at settling their claim through the free early consultation process with ACAS, the claimant may have submitted a claim along with an application for fee remission but been rejected and therefore did not pursue their claim. It will be interesting to see how the Tribunals perceive any such claims.

Finally, while the Tribunals are already rejecting any fees claimants are attempting to pay in person, the Employment Tribunals service will need to act quickly to change the tribunal rules and the online claim form system which at the time of writing still requires upfront payment of fees. The Government website has also been updated to state that no fee is payable, although the forms themselves have yet to be amended.