Added Tribunals (Employment Tribunals and Employment Appeal Tribunal) Order 2013

Lord Beecham Excerpts

Monday 8th July 2013 Lords Chamber

[Lord Beecham]

My Lords, we live in a world where failed bankers and departing BBC executives are awarded compensation for their loss of employment running into millions or hundreds of thousands of pounds, often at the taxpayer’s expense. We seem to be about to live in a world where employees, often low paid, not only no longer receive legal advice or legal aid to pursue a claim arising out of their employment problems but will have to pay significant sums to have their case dealt with by an employment tribunal. It costs only between £35 and £70 to issue a money claim of up to £1,000 in the civil courts but, as the Minister confirmed, it will cost £160 to issue a type A claim—for example, for wage theft, withheld holiday pay or all manner of modest claims—in the employment tribunal, and a further £230 for a hearing, with higher fees where a number of claimants seek the same remedy.

In the more serious type B cases, to which the Minister referred—for example, for unfair dismissal, discrimination or equal pay—the fees rise to £250 to issue a claim and £950 for a hearing. The result is that it costs more for a type B hearing at an employment tribunal than it does to lodge an appeal in the Supreme Court, which costs £1,000, and even with a hearing the total Supreme Court costs are only £1,600—£350 more than for a hearing in the employment tribunal.

The Government are anxious to market our courts to the likes of libel tourists or Russian oligarchs but evidently loath to facilitate access to justice for our own citizens seeking redress in the form of modest payments, frequently amounting to only a few hundred pounds, and often less than £100.

The Government’s own impact assessment demonstrates that 22% of employment tribunal claimants are disabled, with 40% of those claiming discrimination in that category. There is a rising number of claims stemming from pregnancy and maternity issues. Those are particularly vulnerable groups of people who will have to put up the money, disproportionate to any other form of civil litigation, to have their case heard.

In any case, the number of claims has fallen over the past two or three years, and the impact assessment shows a saving of only £12 million. The Minister is right when he refers to the overall cost being about £70 million, but the result of these measures will be, only if people pay the sums, to gather in only £12 million.

The proposed fees for multiple claims to which the Minister referred—for example, in relation to equal pay—compound the injustice. For example, seven supermarket workers claiming for an improper shortfall in their pay amounting to only, in one case, £313.90 between them will have to pay £320 to issue the claim and £460 for a hearing. Given the uncertainties, many people will simply be deterred from bringing a case, not least because the money has to be paid up-front, and in the absence of legal advice potential claimants will not have a ready notion of their prospects of success.

The response to the Government’s consultation paper on the issue contains an interesting passage which I quote in full:

“Employment Judges in Scotland consider that there is a significant risk that if a claim is for a small amount of money then a claimant will be discouraged from pursuing that claim, even although they are legally entitled to the sums due. For example, say an individual is entitled to one week’s wages in respect of holiday pay and the individual is paid just above the threshold which would allow them to qualify for remission. That person may decide that they will not pursue the sum due. This could have the consequence of encouraging a less than fair employer to routinely deprive employees of small sums of money to which they are entitled on the basis that the risk of them pursuing a claim will be small”.

The Government airily dismiss this response and disingenuously aver that claimants will not be deterred from lodging claims. What steps will they take and how soon to ascertain the actual impact of these changes? What do they propose to do about the startling fact revealed by the Ministry of Justice’s own study in 2009, which showed that 40% of awards in England and Wales are not paid at all and that fewer than 50% are paid in full?

In relation to concerns raised by Money Advice Group about the situation of claimants whose employers have ceased trading, and against whom claimants have to lodge a claim to access any payment from the National Insurance Fund, the Government said that they would explore the issue further. I invite the Minister to say whether they have reached a conclusion and, if so, what it is. If he is not in a position to do that tonight—and of course I understand that he may not be—no doubt he will write to me and place the answer in the Library.

Of course, not all claims are for monetary compensation. For example, for a claim under Section 12 of the ERA 1996 to determine the particulars of employment there is simply no monetary component, yet the fee, which will be significant for a number of claimants, will still have to be paid. It should also be noted that there are problems with the timescales—for example, in relation to the payment of the fee or in applying for remission of fees. As the Minister said, there is a remission scheme but this pitches the threshold very low. For example, no fee is payable if the disposable monthly income of the applicant and any partner is £50 or less, with a graduated cap beyond that. That is a very low threshold. Crucially, there will also be a capital limit of £3,000. Ironically, a claimant who, shortly before bringing a case because he is being dismissed, receives a redundancy payment—the claim may not necessarily be related to the dismissal but may relate to other matters—will have that payment counted towards the capital limit.

With a matter of only weeks to go before the new system becomes operational, I understand that there has been no user-testing of it, nor any detailed guidance published about how to apply for remission or appeal against refusal of remission. I do not know whether the noble Lord can enlighten us as to whether and when such testing has taken place or will take place, or when the guidance will be issued.

To be fair, there may be cases, usually affecting large claims, where respondent employers feel that it may be more economic to settle a claim even though it may be without merit. Recent changes in procedure initiated by Mr Justice Underhill may well mitigate this problem, and streamline and improve the management of cases, but in any event the fees for that type of case are unlikely to deter claimants who seek substantial sums from hoping to secure a settlement, while at the same time making it difficult for genuine claimants of moderate means and with more modest claims to pursue their remedy. For a settlement of £50,000, somebody may be prepared to gamble £1,200 or £1,500. Somebody seeking a payment of £50 or even £500 would be much less likely to stake a fee which is close to, or even exceeds, the amount claimed. It should also be stressed that the Gibbons report of 2007 made it clear that only a very small minority of claims could be described as vexatious.

My noble friend Lady Donaghy, with her long experience of ACAS, will no doubt comment on how the role of that organisation might be deployed to improve the working of the system, with or without the proposals in the regulations.

There would be little objection, perhaps, to a modest fee being levied that was much more proportionate to the amount claimed, as occurs in other jurisdictions. However, the Government’s proposal seems to be another in a long series of changes favouring defendants and making access to justice more difficult for ordinary people with meritorious claims. As such, it is deeply regrettable.

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[Lord McNally]

My Lords, I thank all noble Lords who have taken part in this debate, many of whom I know have spoken from a wealth of experience of tribunals, ACAS and the trade union movement. It has been helpful to identify and address concerns. Doing so has enabled me to set on record why the Government have decided to introduce fees in the employment tribunal system and, crucially, what has been put in place to ensure that fees are not a barrier to those wanting to access the justice system.

In speaking to his amendment to the Motion on the fees order, the noble Lord, Lord Beecham, expressed regret that its provisions do not effectively protect access to justice, that some claimants will be deterred from bringing claims and that the remission system is inadequate. Neither I nor my government colleagues accept those arguments. We believe that the mitigations we have put in place will properly protect access to justice for those seeking to bring claims. The remission scheme will ensure that those on low incomes can apply to have their fee reduced or waived entirely and, given the importance of the issues at stake, the Government believe it is unlikely that fees alone will deter those with a strong case bringing a claim. These factors, together with the power for the tribunal to order reimbursement of fees paid, will help to ensure that access to justice is maintained for those who wish to bring a claim.

As I have mentioned, we hope that fees will encourage potential claimants seriously to consider options to resolve disputes outside the tribunal system. From 2014, mandatory early conciliation will mean parties cannot bring a claim to the tribunal without first having sought a conciliated resolution via ACAS. Any decrease in claims after the introduction of fees does not mean that claims are being deterred. It is more likely that disputes are being resolved without the need to use the tribunal, which benefits everyone.

The noble Lord, Lord Beecham, raised a number of issues. He asked whether fees should be charged for someone seeking a small amount. All claimants, irrespective of appeal or claim type should make a contribution to the cost where they can afford to do so, and everyone should also think carefully about entering into litigation irrespective of the remedy sought. Claimants should bear the cost of fees where they make an allegation in a claim and fail to pursue it or where the employer is judged to have acted lawfully.

The noble Lord said that the employment tribunal is more expensive than the civil courts. The civil courts do not offer a reasonable comparator in this instance as they charge at up to five points in the court process and fees are set to recover the full cost. Civil courts process significantly higher volumes of claims and therefore have lower unit costs. In the civil courts, parties open themselves to much wider cost powers, so there are different issues to consider.

The noble Lord asked about the changes to the process for the enforcement of awards when fees are introduced. The enforcement of employment tribunal awards is fast-tracked through the civil courts. There are no plans to make any changes as part of the introduction of fees. However, separately the Government have commissioned new research covering England and Wales and Scotland, and the findings are due to be published next year.

The noble Lord asked whether there will be guidance for those paying fees. We will ensure that all users are clear on the obligation to pay fees or to apply for a remission. Existing HMCTS guidance for employment tribunals will be updated to highlight the stages at which fees are payable. There will be fees and remission leaflets to explain the fees payable, how to pay and where to apply for remission.

[Lord Beecham]

Can the noble Lord say whether they will be in force by 29 July? Will they be available by that date?

[Lord McNally]

If they are not, I will write and tell the noble Lord. The noble Lord also raised the question of whether the Government know what the impact will be. It is difficult to predict the impact that the introduction of fees will have on behaviour. It may be reasonable to assume that if people who are thinking about bringing a claim have to pay to do so, they will more carefully consider whether they wish to do so and their chances of success than they would if the process was free. If this is a valid assumption, we would expect the number of speculative claims—and therefore the number of claims overall—to fall. We will review the impact post-implementation to ensure that the remissions system acts to ensure that only those who can afford to pay fees do so. To ensure that the fee-charging process is simple to understand and administer, we will examine impacts on equality groups in the light of experience and will verify the amount of fee income raised.

The noble Lord asked how we will review fees. Fees will be kept under review as part of an ongoing review of fees across the justice system. The review will seek to ensure that the remission system acts to ensure that only those who can afford to pay do so. The noble Lord, Lord Beecham, asked if redundancy payments will be taken into account in a remission of application. No, this is considered a capital payment under the current scheme. We are considering whether to change this as part of our recent consultation on remissions.

The noble Baroness, Lady Turner, raised a number of matters. Let me make it clear: we do not want a frightened or submissive workforce, as she implied. We want a highly skilled, adaptable, highly productive workforce that can compete in the world. It is important that the noble Baroness understands that introducing fees into these tribunals is not an attempt to deter individuals from bringing claims, and we do not believe that the provisions in the order will do so. Given the importance of the issues at stake, we believe, as I said, that it is unlikely that fees alone—