Employment Tribunal Fees Unlawful
In a momentous judgment based on the principle of access to justice, the Supreme Court in R (on the application of UNISON) v Lord Chancellor has declared employment tribunal and EAT fees to be unlawful under both domestic and EU law. In the Court’s view, the order that brought the regime into effect was unlawful from the outset and must be quashed because it has the effect of preventing access to the tribunal system. The immediate consequence is that tribunal and EAT fees cease to be payable under the existing scheme. Fees already paid must presumably be reimbursed by the Government, in line with an undertaking given by the Lord Chancellor in July 2013.
The Employment Tribunals and the Employment Appeal Tribunal Fees Order 2013 SI 2013/1893 (‘the Fees Order’) introduced a new fees regime with effect from 29 July 2013. Under the Fees Order, employment tribunal claimants and EAT appellants are liable to pay a fee in order to bring and pursue claims and appeals, unless they qualify for fee remission on the basis of their disposable capital and gross monthly income. The trade union UNISON sought judicial review and a quashing of the Fees Order, arguing (among other things) that the fees regime breached the EU principle of effectiveness, whereby the procedural requirements for domestic actions must not be liable to render practically impossible or excessively difficult the exercise of rights conferred by EU law. UNISON’s challenge was rejected by the High Court on two separate occasions and, in August 2015, by the Court of Appeal.
The Supreme Court has now upheld UNISON’s challenge. Lord Reed delivered the leading judgment, with which the other six Supreme Court Justices agreed. He referred to evidence on the impact of fees – in particular, a consultation paper published by the Ministry of Justice in January 2017, ‘Review of the introduction of fees in the Employment Tribunals: Consultation on proposals for reform’ (‘the Review Report’). He acknowledged the ‘dramatic and persistent fall’ in the number of employment tribunal claims since the Fees Order came into force, representing a reduction in cases of 66–70%. The proportion of claimants receiving fee remission was far lower than the Government had anticipated, while the Lord Chancellor’s discretionary power to remit fees in exceptional circumstances had rarely been exercised. It was also relevant that the Order had made a much less significant contribution to tribunal costs than expected, had failed to deter unmeritorious claims and did not appear to have resulted in more Acas settlements.
Against that backdrop, Lord Reed addressed the legal principles. He focused on the common law right of access to justice, noting that it ‘is not an idea recently imported from the continent of Europe, but has long been deeply embedded in our constitutional law’. The right of access to the courts could be traced back to Magna Carta of 1215. More recent authorities made it clear that any interference with the right required clear authorisation by statute, which must be interpreted as permitting only such a degree of intrusion as is reasonably necessary to fulfil the objective of the provision in question. Lord Reed rejected the assumption – evident in the Government’s consultation on the introduction of fees – that the provision of services by employment tribunals was of value only to litigants and provided no broader social benefit. Individuals need to know that they can enforce their rights if they have to, and businesses need to know that there is likely to be a remedy against them if they fail to meet their obligations. Tribunal claims enable legislation to have the deterrent effect that Parliament intended, as well as providing authoritative guidance as to the meaning and application of the relevant legislation and underpinning alternative methods of dispute resolution.
The Court accepted that the purposes underlying the Fees Order – transferring the cost burden to the ‘users’ of the tribunal system, incentivising earlier settlements, and discouraging weak or vexatious claims – were legitimate. However, the Lord Chancellor could not lawfully impose whatever fees he chose in order to achieve those purposes. The Order would be unlawful if there was a real risk that it would effectively prevent access to justice. In order for the fees to be lawful they had to be set at a level that everyone could afford, taking into account the availability of full or partial remission. The evidence led to the conclusion that this requirement was not met. The Review Report had acknowledged the ‘sharp, substantial and sustained fall’ in the volume of cases brought since the introduction of fees. In Lord Reed’s view, this warranted the conclusion that a significant number of people who would otherwise have brought claims had found the fees to be unaffordable. The Report estimated that around 10% of potential claimants did not bring proceedings because they could not afford the fees, but this was likely to be an underestimate. Lord Reed referred to a number of hypothetical examples provided by UNISON, in which payment of the fees would result in households on low to middle incomes falling below the level of income estimated by the Joseph Rowntree Foundation as being necessary to meet acceptable living standards. Where households could afford fees only by sacrificing the ordinary and reasonable expenditure required to maintain an acceptable standard of living, the fees could not be regarded as affordable.
Lord Reed added that affordability was not the only consideration. Tribunal fees could also prevent access to justice if they rendered it futile or irrational to bring a claim. He observed that many claims entail no financial award or involve modest amounts. If, for example, fees of £390 have to be paid in order to pursue a claim for £500 (the median award in claims for unlawful deductions from wages), no sensible person would proceed unless he or she could be virtually certain that the claim would succeed, that the fees would be reimbursed and that the tribunal’s award would be paid in full by the employer. In practice, success can rarely be guaranteed, and only around half of successful claimants receive full payment from the respondent. For all these reasons, the Fees Order effectively prevented access to justice and was unlawful.
The Order would also be unlawful if it could not be justified as a necessary restriction on the right of access to justice. The primary aim of the Order was to transfer some of the cost burden from taxpayers on to the users of the tribunal system. The Government had assumed that higher fees would generate a higher income, thereby transferring a higher proportion of costs to users. In order to obtain the maximum revenue, however, it was necessary to identify the optimal price for the service, which depended on the ‘price elasticity’ of demand (a measure of the relationship between the level of fees and the number of tribunal cases brought). It was clear that tribunal fees were not set at the optimal price: the Government had greatly underestimated their deterrent effect on the bringing of claims. Nor, having regard to the evidence, was the level of fees set by the Order necessary to achieve the Government’s secondary aims – to incentivise earlier settlements and to discourage weak or vexatious claims.
Lord Reed then considered the impact of the fees regime on employment claims derived from EU law. He referred to the EU principles of effectiveness and effective judicial protection and the right to a fair hearing under Article 6 of the European Convention on Human Rights. According to the European Court of Human Rights, any financial limitations on the right of access to a court or tribunal must pursue a legitimate aim and be proportionate to that aim; in Lord Reed’s view, this was consistent with domestic law. The ability to pay fees was not determinative of their proportionality under EU law; other factors must be considered, including the stage of the proceedings at which the fees must be paid, whether non-payment might result in the claim never being examined on its merits and whether the fees were proportionate to the sum being claimed. Fees that were unrelated to the merits of a claim or its prospects of success should be subject to particularly rigorous scrutiny. Given that tribunal fees were, in practice, unaffordable by some people and were so high as, in practice, to prevent even people who could afford them from pursuing claims for small amounts and non-monetary claims, Lord Reed concluded that the Fees Order imposed disproportionate restrictions on the exercise of EU-derived rights and was therefore contrary to EU law.
In a separate judgment, Lady Hale addressed UNISON’s arguments relating to discrimination. Although it was unnecessary to decide the issue, she considered that the Fees Order was indirectly discriminatory under S.19 of the Equality Act 2010. She reasoned that because ‘Type B’ cases (including discrimination claims) attract a higher fee, and a higher proportion of women bring Type B claims than bring Type A claims, women are placed at a particular disadvantage compared with men. The higher fees for Type B claims had not been shown to be justified as a proportionate means of achieving the Government’s stated aims.
C Thomson Reuters