ET Fees Order declared unlawful ab initio

July 26, 2017

Jason Braier looks at today’s momentous Supreme Court decision in R (Unison) v. Lord Chancellor to declare unlawful the employment tribunal fees regime.

Introduction

On 29 July 2013, the Employment Tribunals and the Employment Appeal Tribunal Fees Order 2013 (“the Fees Order”) came into force, establishing a fees regime for issuing and pursuing claims before the ET and appeals before the EAT.  Following today’s Supreme Court judgment, the Fees Order is no more.  It has been declared unlawful ab initio, and the Lord Chancellor’s Department has undertaken to reimburse all fees paid (presumably including interest).

The Supreme Court’s judgment is a must-read, both in what it says specifically about the fees regime issue, and its more general treatment of the rule of law and its interplay with access to justice.

The Supreme Court found the Fees Order unlawful on domestic law grounds concerned with deprivation of access to the courts and on EU law grounds under the principle of effectiveness.  The higher fee for Type B claims (which includes discrimination claims) was also found to be indirectly discriminatory against women (and perhaps those with other protected characteristics) as the higher charge was not objectively justified.

The Influence of the Hypothetical Claimants

Apart from the well-known statistics about the drop off in employment claims as well as  surveys about those who did not proceed with claims due to fees, the Supreme Court appear to have been particularly influenced in allowing the appeal by two hypothetical claimants: a single mother with one child, earning £27,264 per annum gross salary, and a claimant with a partner and two children where both parents earn the minimum wage for full-time work.  In both cases, the net monthly income falls short of the Joseph Rowntree Foundation minimum required to achieve an acceptable living standard.  In both cases, ET fees would have been payable, requiring further sacrifices from an already insufficient income.

The consequence is the prevention of access to justice.  As Lord Reed points out [para 96], that is not only in cases of low income, but also where it would be logically futile or irrational to bring a claim due to it being of low (or no) financial value:

If, for example, fees of £390 have to be paid in order to pursue a claim worth £500…no sensible person will pursue the claim unless he can be virtually certain that he will succeed in his claim, that the award will include the reimbursement of the fees, and that the award will be satisfied in full.  If those conditions are not met, the fee will in reality prevent the claim from being pursued, whether or not it can be afforded.

Whilst there are concerns about the impact of the fees regime on Type B claims, it is the deterrent effect on the bringing of low value claims (mainly falling within Type A) which appears to be of the greatest concern to the Supreme Court [see para 97].

Access to Courts and the Rule of Law

Many aspects of the judgment bring a lump to the employment lawyer’s throat, but perhaps the greatest lump is formed by Lord Reed’s response to the 2012 impact assessment’s identification of reduction of ‘deadweight loss’ as a non-monetised benefit of implementing the fees regime.  In comments that call to mind the ceremonial read-out at remembrance ceremonies of those who valiantly fought and died for the greater good in wars past, Lord Reed said this at paragraph 70:

Every day in the courts and tribunals of this country, the names of people who brought cases in the past live on as shorthand for the legal rules and principles which their cases established.  Their cases form the basis of the advice given to those whose cases are now before the courts, or who need to be advised as to the basis on which their claim might fairly be settled, or who need to be advised that their case is hopeless.  The written case lodged on behalf of the Lord Chancellor in this appeal itself cites over 60 cases, each of which bears the name of the individual involved, and each of which is relied on as establishing a legal proposition.  The Lord Chancellor’s own use of these materials refutes the idea that taxpayers derive no benefit from the cases brought by other people.

That falls in the section titled ‘The constitutional right of access to the courts’.  It will doubtless be required reading on all law syllabuses henceforth, and should be read in full, but paragraph 68 so beautifully encapsulates the essence of the interplay between democracy, the rule of law and access to justice that I set it out below:

At the heart of the concept of the rule of law is the idea that society is governed by law.  Parliament exists primarily in order to make laws for society in this country.  Democratic procedures exist primarily in order to ensure that the Parliament which makes those laws includes Members of Parliament who are chosen by the people of this country and are accountable to them.  Courts exist in order to ensure that the laws made by Parliament, and the common law created by the courts themselves, are applied and enforced.  That role includes ensuring that the executive branch of government carries out its functions in accordance with the law.  In order for the courts to perform that role, people must in principle have unimpeded access to them.  Without such access, laws are liable to become a dead letter, the work done by Parliament may be rendered nugatory, and the democratic election of Members of Parliament may become a meaningless charade.  That is why the courts do not merely provide a public service like any other.

 Discrimination

Lord Reed dealt in his judgment with all aspects of the unlawfulness of the Fees Order bar one: whether it was discriminatory.  That honour was left to Lady Hale.  The Fees Order was said to be indirectly discriminatory given that the higher fee payable for Type B claims disparately impacts on women given that a higher proportion of women bring Type B claims than bring Type A claims.  The PCP which had to be justified was the charging of higher fees for Type B claims.  In finding that PCP not justified, Lady Hale hoist the Lord Chancellor by his (or perhaps her, given that the Lord Chancellor was Liz Truss at the date of the hearing) own petard.  Whilst accepting that generally (albeit not always) Type B claims taking longer than Type A claims and hence the cost of providing the tribunal service is higher, Lady Hale noted that transferring the cost of tribunals from the taxpayer to the user was only one of the various stated aims.  Those aims also included deterring unmeritorious claims and encouraging earlier settlement – the method chosen had to be a proportionate means of achieving all the stated aims of the Fees Order [para 128].  Lady Hale found the Lord Chancellor failed to show the means (of charging higher fees for Type B claims) to be a proportionate means of achieving any of the stated aims [paras 130-131].  In respect of the price versus cost aim, she noted the length and cost of proceedings may be the responsibility of the respondent or tribunal rather than the claimant.  In respect of the deterrent effect, that applied equally to claimants with good claims as to those with bad.  The incentivisation aim was not achieved given that the need to incur fees may incentivise the claimant to settle but disincentivise the respondent to do so.

The claimants also put their indirect discrimination claim on a second basis, not tied to the entire range of Type B claims, but just to discrimination claims.  The argument was that given that women and those with other protected characteristics bring the majority of discrimination claims, the high fees chargeable for discrimination claims was itself indirectly discriminatory.  Whilst not resolving the question, Lady Hale was inclined to the view that such a claim would not succeed [paras 133-134].  The PCP would be the higher fee for all Type B claims.  The PCP would be applied to everyone who brings a Type B claim – hence that is the pool under EqA section 19(2)(a), and it is difficult in those circumstances to see how women bringing discrimination claims are in a worse position than, say, men bringing unfair dismissal claims who are charged the same fee.

Conclusions

So the result, as stated at the start of this article, is that the Fees Order is unlawful ab initio.  Fees paid will be reimbursed.

The judgment does not, however, go so far as to suggest that any employment tribunal fee regime would be unlawful, but merely this one.  In doing so, Lord Reed gave a lesson in elementary economics [para 100].  Without namechecking the Laffer Curve so beloved of those debating income tax rates, the lessons from that curve were brought to the fore, namely that to obtain maximum revenue it is the optimal price and not the highest price that needs to be identified, given the impact on revenue of the price elasticity of demand.  If the fees are set too high, and thereby overly discourage the bringing of claims, the revenue level will not be maximised.  It is possible the Government will go back to the drawing board and rethink optimal pricing, the fee remission scheme and the banding of claims which attract fees.  To achieve a regime which achieves the stated aims behind the Fees Order whilst not offending against access to justice or the prohibition on discrimination would, however, be a very delicate balancing act indeed.  Whether there would be the political will post-election is another matter given that the Labour Party, Lib Dems and SNP all proposed abolition of the fees in their manifestos (albeit that as delegated legislation any new fees order would be subject to approval by affirmative resolution of each of the Houses of Parliament – a process that invites far less scrutiny than primary legislation).

The abolition of fees will doubtless lead to some increase in employment tribunal claims, especially those of low value, particularly national minimum wage and unauthorised deduction claims.  It will also emasculate the problems caused by the recent EAT judgment in Farmah and Others v. Birmingham City Council, which greatly restricted the breadth of equal pay claimants who could join together to bring a claim, and would thus have required many class equal pay actions to incur enormous aggregate tribunal fees.

 

Barristers