Unlawful Employment Tribunal fee regime ruling – The implications for employers

Now that the dust has settled on July’s landmark ruling by the Supreme Court that the current Employment Tribunal fee regime was preventing access to justice, was unlawful and should therefore cease with immediate effect, we look an in-depth look at the implications for employers.

Prior to the introduction of fees there is no doubt that employers were frustrated by the time and money they had to throw at an increasing number of frivolous and vexatious Employment Tribunal claims. As such, the introduction of fees and compulsory Early Conciliation were both positively received by employers, and the effectiveness of these measures in reducing claim levels far exceeded expectations. That being the case, the Supreme Court’s decision is unlikely to spell the end of fees indefinitely and it is likely that at some point in the future an alternative regime will be introduced which sets fees at a level which sufficiently addresses the “barrier to justice” issue.

That said, Dominic Raab (Minister of State for Courts & Justice) answered a number of questions on the matter in the House of Commons on 5 September 2017 and adopted an apologetic tone towards anyone prevented from bringing a claim as a result of the fees involved. Critically, he gave no indication that there was any plan to introduce a new fee regime in the foreseeable future. Indeed, Parliament is likely to be far too busy with Brexit to find time to deliberate over this anytime soon and so it’s probably wise to plan for life without any fee structure at all in the short to medium term.

With this in mind, the most obvious consequences of the Supreme Court’s judgment are:

1. the likely reinstatement of claims that were struck out for non-payment of fees;
2. that people who decided not to take cases to tribunal due to the fees involved will now seek permission to make those applications, notwithstanding the fact that they would likely be beyond the prescribed time limit; and
3. that it is highly likely that there will be an increase in the number of new claims.

In respect of claims arising under points 1 and 2 above, a Case Management Order which initially stayed such claims has recently been lifted and they now fall to be considered in the normal way. The test applying to unfair dismissal claims which have been presented outside the time limit is whether it was “reasonably practicable” for the claimant to have presented the claim in time, and if not, whether he/she presented the claim in such further time as the Tribunal deems to have been reasonable.  In claims involving a discrimination complaint the Tribunal has a wider discretion to extend time where it deems it to be “just and equitable” in the circumstances. It’s worth bearing in mind, however, that any delay there’s been in bringing such claims since 26 July 2017 is likely to work against the claimant applying for the extension.

There is no doubt, however, that it is now easier for individuals to bring new tribunal claims, and therefore it’s highly likely that we will see a rise in their volume.  Similarly, not having to pay up to £950 in order to progress a case to a full hearing means that fewer cases are likely to be withdrawn or struck out because of an unwillingness to pay. Employers will therefore be asking themselves the age-old question of whether it’s better to “fight or fold” if a claim is made against them.

In 2007 a government review of employment dispute resolution in Great Britain estimated the average cost to an employer of defending a claim to be approximately £9,000. In 2011, the British Chambers of Commerce (BCC) stated that employers typically face bills of around £8,500 when they fully defend claims…and that’s not taking into account any award, time, worry and effort.

The extent of legal and management resources often required to fully defend a claim means that a win-at-all-costs strategy is rarely a sensible one and it may be cheaper to attempt to settle the claim on a commercial basis. However, the benefits of doing so need to be considered in the context of the message this sends out to existing employees. Settle too many and you could be seen as an easy target, which could result in an increased number of claims from employees / ex-employees confident of securing pay-offs regardless of the actual merits of their cases.

So how do you deal with this dilemma? The answer is to get more scientific with your decision-making process. There are a number of key factors you should consider immediately upon receipt of a claim, in order to assess whether it should be defended or settled at an early stage. These are as follows:

1. How likely you are to be able to successfully defend the claim. Although the outcome of tribunal claims is never certain, it is still possible to make a reasonable prediction of the chances of success if you obtain professional advice.
2. How much compensation you will be required to pay if you lose the case.  You need to know the applicable compensation limits applying to the type of claim, current award stats and the likely extent of any financial loss on the claimant’s part.
3. How much defending the claim is likely to cost in terms of legal fees.
4. How much management time you will be required to commit to defending the claim, with reference to the complexity of the case, the number of witnesses and what position they hold in the business.
5. How much scope there is for reputational risk in defending the claim. Most tribunal hearings are held in public, which means that the press and members of the public are free to attend and listen to the evidence heard and the judgments delivered.

If, after consideration of all of these factors, you decide to fight your corner, the key to a successful defence will be to take charge of the claim from the outset and follow these key steps:

1. Check for any features of the claim that may mean the tribunal doesn’t have jurisdiction to hear it, e.g. if it was submitted outside the prescribed time limit.
2. Compile a chronology of events that clearly and concisely outlines the processes / procedure applied, and build your response around it.
3. Identify the legal weaknesses of the claim, emphasise these from the outset and continue to do so throughout the lifecycle of the case.
4. Expose inaccurate and false information used by the claimant in the context of the claim through the disclosure process, witness evidence and cross-examination.
5. Consider issuing a costs warnings if necessary and appropriate with reference to the merits of the claim and / or the claimant’s conduct of proceedings. Although costs awards are rarely made in Employment Tribunal proceedings, the threat of them may have a deterrent effect.
6. Apply due care and attention to the preparation of witness statements making sure they put the issues in dispute firmly into context.

Over the course of the last 30 years, we have helped employers defend in excess of 3,000 tribunal claims. We are not a huge law firm with fees to match, nor are we a solicitor’s practice that prefers to keep clients at arm’s length. We are a long-established consultancy that provides tailored support on HR and Employment Law issues to organisations of all sizes and from all sectors.

Through our partners, Albion Legal (who are authorised and regulated by the FCA – No: 310026), we can offer an optional Employment Protection Scheme, which covers all legal fees, settlements and awards incurred in respect of any Employment Tribunal proceedings. The policy also includes any costs incurred in instructing us to deal with Acas Early Conciliation on your behalf, and there are optional add-ons relating to legal fees associated with Health & Safety prosecutions and the enforcement of restrictive covenants where an employee is in breach.

Of course, we are still firm believers in the old adage that ‘prevention is better than cure’ when it comes to employment litigation. In this sense, robust and consistently applied employment documentation supplemented by our ongoing expert advice should minimise the scope for claims arising in the first place.

If you would like to discuss any of the issues raised in this blog further, please do not hesitate to contact one of our HR consultants for commercially minded employment law advice, further information on Albion’s Employment Protection Scheme…and indeed any of our other bespoke HR services.