UK: Supreme Court rules tribunal fee regime is unlawful

The Supreme Court has this morning handed down its judgment that the fee regime introduced for Employment Tribunal and Employment Appeal Tribunal claims in July 2013 is unlawful under both domestic and EU law as it has the effect of preventing access to justice.  The relevant Fees Order is quashed and fees will cease to be payable from today, meaning that the tribunal rules and online claim forms will need immediate amendment.  In accordance with an undertaking given by the Lord Chancellor at an earlier stage of the proceedings, all fees paid in the past will have to be refunded (whether paid by the respondent employer, as is usual where the claim is successful, or by the claimant).  The judgment in R (on the application of UNISON) v Lord Chancellor is here; the summary for the press is here.

The Court noted that, contrary to assumptions made in the government consultation papers, unimpeded access to justice is of benefit to the public as a whole, not just to the 'users' of the system.  It is a fundamental principle of common law that there must be effective access to justice: this enables courts to decide questions of general importance and the possibility of claims upholds respect for the law and underpins alternative methods of dispute resolution.  The fee regime would therefore be unlawful if there was a real risk that individuals would effectively be prevented from having access to justice, or the degree of intrusion into access to justice was greater than was justified by the aims. The Supreme Court concluded that the fee regime was unlawful on both counts:

• fees which are not 'affordable' effectively prevent access to justice; 'affordable' in this context means 'reasonably affordable' in the real world
• the sharp fall in claims (of 66-70%) following the introduction of fees demonstrated a real risk that a significant number of people who would otherwise have brought claims had found the fees to be unaffordable
• fees will not be 'reasonably affordable' if low to middle income claimants have to forego an acceptable standard of living for a substantial period of time. Hypothetical worked examples showed that such claimants would have to cut out ordinary and reasonable expenditure (in the example, all spending on clothing, personal goods and services, social and cultural participation, and alcohol) for between one and three and a half months in order to afford the fees set; as such the fees could not be regarded as reasonably affordable
• even had they been 'affordable', the fees prevented access to justice in that they bore no real relation to the amount claimed (unlike fees in the small claims court) and rendered it futile or irrational to bring claims for modest amounts or non-monetary remedies, which together form the majority of tribunal claims
• although the aims of the fee regime (to transfer part of the cost burden from taxpayers to users, deter unmeritorious claims, and encourage earlier settlement) were legitimate, the particular fee regime chosen was not shown to be the least intrusive means of achieving those aims.  It was wrong to assume that the higher the fee, the more income it would generate, where in fact lower fees might increase the total income generated if the number of claims increased as a result.  The evidence did not support contentions that the fees had incentivised earlier settlements or disincentivised week or vexatious claims
• for similar reasons, the application of the chosen fees to claims for EU-derived rights was a disproportionate limitation on the exercise of those rights and a breach of the EU law guarantee of an effective remedy
• finally, the choice of a higher fee for 'type B' claims was indirectly discriminatory against women given that a higher proportion of women bring type B claims than bring type A claims, and the higher fee had not been shown to be a proportionate means of achieving the stated aims of the regime.  Not all type B claims involved a greater workload for the tribunal, and there was no evidence that the higher fee generated more income, incentivised settlement or disincentivised unmeritorious claims.

The removal of fees is of particular benefit to multiple claimants, given the EAT's recent ruling in Farmah and others v Birmingham City Council that equal pay claims involving claimants performing different jobs cannot be included on the same claim form under tribunal rules. The rules permit multiple claims to be combined only if they are based on the 'same set of facts'; the EAT held that the 'facts' included the work that the claimant and comparator were doing. The fee regime provided a significant cost incentive for groups of claimants to use a single claim form, with a single fee, where possible. The removal of fees therefore reduces the costs for future multiple claimants needing to use individual claim forms post Farmah. Further, the inclusion of multiple claims in breach of the rules is an irregularity which the tribunal has a discretion to waive but, according to the EAT in Farmah, the claimants' desire to minimise tribunal fees was not to be regarded as sufficient reason to exercise that discretion. That aspect of the ruling may now need to be reviewed, particularly in light of previous practice where such irregularities were indeed often waived.

The judgment leaves open the possibility of the government devising a different, lawful fees regime, perhaps involving fees at a lower level and/or pegged to the value of a claim, and/or payable by the employer at key stages during the tribunal process.  We will report on the government's response in due course.  It has also been suggested that individuals who were unable reasonably to afford the fee to bring a tribunal claim after July 2013 could now seek to argue that the tribunal should extend time to allow late claims.  We discuss this further in our blog post here.