HM Insights

Employment Tribunal Fees

In publishing the results of the consultation on the introduction of fees in employment tribunals, the Ministry of Justice announced that employment tribunal fees "will be tailored to encourage businesses and workers to mediate or settle a dispute rather than go to a full hearing from summer 2013".

What will this mean for the future of employment tribunal claims?

The proposed fee structure for employment tribunal claims is categorised into 2 levels. Level 1 includes claims such as unpaid wages, payment in lieu of notice and redundancy payments. Level 2 generally catches all other types of employment claim, including unfair dismissal, discrimination and equal pay.

In order to raise a Level 1 claim, the issue fee (payable at the time of submission) is proposed as £160. Should the case proceed to a merits hearing a further fee will be payable by the claimant prior to the hearing of £230. For Level 2 claims, the issue fee is to be set at £250 and the hearing fee at £950. Where multiple claimants raise conjoined proceedings the fee structure will introduce multipliers which will be dependant on the number of claimants.

There will also be fees for appealing to the Employment Appeal Tribunal. The fee for initially lodging an appeal will be £400 and the hearing fee £1,200. Other fees are proposed, including a £60 fee for an application to dismiss a claim following settlement. Such applications are par for the course for employers who want a tribunal judgment confirming the litigation is at an end and cannot be re-kindled by the claimant in the future.

The remission system operating in the civil courts, whereby individuals on low incomes are exempt from payment, will be extended to the employment tribunal framework. Exemptions from payment of fees generally only apply under that system where the litigant is receiving certain state benefits. A combined review of the remission system in the civil courts and employment tribunal context will be carried out once the fee structure is in place.

Importantly, the employment tribunals will have a discretionary power to order a losing party to pay the fees incurred by the successful party. Therefore although the initial outlay will fall on the employee, there is scope that unsuccessful employers will ultimately bear the burden of the fees on top of any award against them.

The announcement on fees coincides with the reforms to employment law currently passing through parliament in the form of the Enterprise and Regulatory Reform Bill, including the duty on parties to attempt conciliation through ACAS prior to raising a claim in the employment tribunal. That concept will not be an entirely unfamiliar one to those who recall the (unsuccessful) fixed periods of conciliation which were abolished in 2009, and which were similarly aimed at promoting early resolutions outside of tribunal.

The fee structure is an unprecedented innovation in the history of the employment tribunal service, and in some quarters it is suggested that it will erode the underpinning ethos of accessibility and informality. It seems reasonable to predict that it will lead to some reduction in the volume of claims raised, but how significant any such drop will be is difficult to gauge and may depend greatly on the system of exemptions put in place.

Additionally, concern has been raised as to whether ACAS has the resources to meet the increased caseload envisaged by the measures.

The reforms may see an increase in union membership dues and insurance premia for employment law services which can frequently be covered as an optional extra via household policies. An extra dynamic of settlement negotiations will be the ultimate risk of liability for the fees and no doubt claimants will seek to recover any outlays they have incurred as part of their discussions. However, as employers generally have deeper pockets than employees it may be that the impact on claimants' behaviour in negotiations will be most significant as the risk to their bank balance in the event they are unsuccessful at a hearing is likely to weigh more heavily in their decision-making than the equivalent risk to their employer. As the spectre of a hearing draws closer and the requirement to 'put up' the hearing fee looms, some employees may begin to take 'cold feet' and be willing to accept relatively modest offers. Ironically, this dynamic may encourage employers to delay in coming to the negotiation table as they wait to see whether claimants are willing to put their £950 on the table. Such a tactic would of course run contrary to the Government's aim of encouraging early settlements with minimum recourse to the services of the tribunal.

The Government has made clear that the aim of introducing fees is to lower the cost of the employment tribunal system to taxpayers, but only time will tell as to the true impact of this revolutionary development.