Employment Tribunal Fees

Chris Stephens Excerpts

Tuesday 1st December 2015 Westminster Hall

[Justin Madders]

I thank my hon. Friend for his intervention. I will address later some of the disproportionate impacts of the fees, but they are part of a bigger picture: they are part of a sustained attack on working people in this country. A lot of the legislation in the previous Parliament and currently going through the House is nothing more than an attack on basic workplace rights and protections. If our ambition is to have an economy and country where everyone has a stake in their prosperity, we should value the security and sustainability of jobs as much as the means of creating them.

It is widely recognised that losing a job is one of the major occasions in life on which people face extreme pressure and stress. Obviously, it is not quite as significant as some other issues, but for many, it can be a pretty traumatic experience. It can affect a person’s marriage, health, home, finances and, of course, family, yet we seem to be fostering a culture in which an individual is considered a disposable item to be cast aside with barely a second thought. While that culture exists, it is important that we have strong protections in place and—this relates to today’s debate—an effective and accessible system enforcing those protections.

Let us look first at the stark data, which show that the number of tribunal claims lodged has fallen off a cliff since the introduction of fees in July 2013.

[Chris Stephens (Glasgow South West) (SNP)]

I congratulate the hon. Gentleman on securing this important debate. One of the reasons given for the introduction of these fees was to protect hard-working taxpayers from having to contribute to the cost, ignoring the fact that the people bringing these claims are hard-working taxpayers. Does he agree?

[Justin Madders]

I thank the hon. Gentleman for his intervention; his record on representing working people is one of note. He is absolutely right that everyone who takes part in the system contributes already through their taxes. As I will go on to demonstrate, there is little sign of any wider benefit to society. In fact, it could be argued that the fees are creating more problems than they solve.

Between October 2013 and September 2014, there were 32,671 fewer single claims brought by individuals than in the previous 12 months. That is a decrease of 64%. Over the same period, the number of multiple claim cases—those brought by two or more people against the same employer—was down by 3,527. That is a decrease of 67%. Comparing different periods can produce different figures, and an awful lot of different comparisons can be made. Indeed, some comparisons show up to an 80% drop in claims lodged. Whatever the comparisons or periods used, there is an average drop of around 70% in the number of claims lodged. It is therefore indisputable that there has been a significant drop in the number of claims since the introduction of fees.

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[Justin Madders]

My hon. Friend, of course, has great experience in this area. The Government should be setting an example. They should be leading from the front and be seen to be engaging in the processes that promote and encourage good workplace relations. Is it not really something when we have a Government Department potentially discriminating against someone or impinging on their workplace rights, then refusing to engage with the systems that that Government have set up to try to resolve that dispute? And then the Government charge that person to force their rights. What kind of situation is that? It is not a fair, equitable or just way of dealing with matters.

Let me turn to the significant amount of evidence submitted to the Justice Committee. I think my hon. Friend the Member for Wirral West (Margaret Greenwood) has referred to evidence that was given to the Justice Committee in respect of NOMS, and I recommend anyone who has not read those transcripts that look at that evidence. In it, multiple witnesses demonstrate the deterrent effect that fees have had; that evidence goes well beyond the data that have been referred to.

[Chris Stephens]

The hon. Gentleman is making a number of excellent points. On fees, does he agree that there will be an impediment to cases in which a worker brings a case for an illegal deduction of wages, because the fee will be higher in some cases than the amount that the worker is looking for in their claim?

[Justin Madders]

The hon. Gentleman is absolutely right on that point, which I will come to later. Speaking from personal experience as a lawyer before I entered this place, I have a number of examples of such situations, and that cannot be right in a fair and just society. Returning to the Justice Committee, it received evidence from Citizens Advice, which published a report called “Fairer Fees” in January 2015. It stated that 82% of its clients said that the fees deterred them from bringing an employment tribunal claim.

All the Government talk at the introduction of the fee regime was about weeding out vexatious claims. As I will go on to demonstrate, there has been no convincing evidence put forward that this system has done anything to reduce such claims, in stark contrast to the significant body of evidence suggesting that people with genuine complaints have not been able to pursue their rights as a result of the fee system. It may be that part of the Government rationale is that those who use the system should contribute to it, in which case far more equitable solutions can be found. It may be that despite everything else, it is and always was part of the Government’s plan to reduce the number of claims being made, in which case they have succeeded.

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[Justin Madders]

I thank my hon. Friend the shadow Minister for his intervention. Of course he is absolutely right: that advice is an important safety net. I know from experience that the majority of people who are advised that they do not have a claim will take that advice on the chin and will not pursue the claim, so the fact that we have not been able even to maintain levels of access to advice has probably only made the situation worse.

As I was saying before the intervention, there are rules to deal with unmeritorious and vexatious claims. I want the Minister to tell us today whether he considers that those rules are effective, and if he does not, what he will do to change them.

Denying access to justice via a high fee level is arguably making no difference at all to the number of vexatious claims being lodged, because if this system was weeding out vexatious claims, the success rate would increase. The fact that it has not suggests that the fee system is a deterrent to all. Ministry of Justice statistics indicate that success rates have in fact remained broadly the same, rather than increasing. In the four quarters before fees were introduced, success rates ranged between 10% and 9%. In the four quarters after fees were introduced, success rates were broadly similar at 9%, 9%, 5% and 13%. Even the president of the employment tribunals, Mr Brian Doyle, suggested that only a very small percentage of claims can be identified as weak or unmeritorious and that we need to be careful about the way in which we bandy around the term “vexatious” when it comes to claims.

[Chris Stephens]

Can the hon. Gentleman confirm that those workers who have the benefit of trade union membership will find that a trade union also has a test as to whether to proceed with a claim to a tribunal?

[Justin Madders]

I thank the hon. Gentleman for his intervention. He is of course absolutely right. Trade unions play a vital role in ensuring that justice is served for their members, but they also play a wider role by not supporting or endorsing claims that are considered vexatious or weak. We really should mark out that contribution that is made. Of course the vast majority of people who work in this country are not trade union members. Perhaps that is one reason why the figures have not substantially changed as a result of these initiatives from the Government.

The myth that there is a vexatious culture out there has been perpetuated by parts of this Government and certain sections of the media. It is almost as if they believe that there is an army of litigious individuals out there who are routinely fleecing employers with spurious claims. That view has no basis in fact. As I said, there are already rules to stop vexatious claims proceeding. Each case is considered by a legally qualified judge. Most employers have access to professional advice on their case and far more are legally represented at tribunals than claimants—and all of that in a country that regularly appears near the bottom of the pile in any OECD studies of the strength of employment protection across the planet. It is far from the easy ride for employees that some people would portray.

In addition, it is simply not the case that there are hundreds of no win, no fee lawyers out there ready to exploit employers by bringing forth spurious claims. The clue is in the title: “no win, no fee”. If the lawyer does not think that the claim will win, they will not get paid for it, so why would they waste time pursuing a claim that they know will ultimately be unsuccessful?

The idea that employers are a soft touch in these matters is simply untrue. Most are professionally represented and should be able easily to spot someone trying it on. There is a question about how those who are not members of trade unions access affordable representation. We have dealt with that in some of the interventions today. Of course I would say that the best thing that anyone can do to protect themselves in the workplace is to join a trade union, but that is not a substitute for basic advice and support for people who find themselves in these very difficult situations. The Government have pulled the rug out from under them.

This system not only prevents access to justice, but feeds the myth that employment rights are some sort of undesirable impediment to properly functioning businesses. At its worst, it acts as encouragement to those rogue employers who think that employment protection and workplace rights are an optional extra to be ignored whenever possible.

There is plenty of evidence from those representing individuals in employment tribunals, including those who gave evidence to the Justice Committee, that some employers will deliberately decide not to engage in any kind of discussion about resolution of a claim until the very end of the process, even when they may very clearly be in the wrong. The pre-claim conciliation process run by ACAS can be and often is met by employers refusing to engage at all. They know that if they have dismissed an employee, they may not have the funds to pay for a tribunal claim. Even when one is under way, they still hold off until the hearing fee is paid before seriously considering whether they should engage in settlement negotiations. That can be as little as three weeks before the tribunal hearing. That wastes everyone’s time and the tribunal’s and the taxpayer’s resources. There is a category of employers who will not engage with anything unless they know that the employee has paid their £1,200, but even in the cases in which the lower fee applies, there is now a real dilemma facing employees, who are asking themselves, “Can I afford to take this on even though I know I am in the right?”

The starkest example—I referred to this earlier—is one from my own experience shortly before I was elected to this place. It involved an employer systematically refusing to pay their staff over a period of weeks. They refused to engage with ACAS in early conciliation and decided instead to sit back and wait for the tribunal claims that never arrived. The people affected whom I saw were all women and had all lost several weeks’ wages. There was no doubt that money was owed, but all of them questioned spending £390 to recover a similar amount and some of them were actually seeking to recover less than their initial outlay in fees, so for them the dilemma was even greater. Of course, there was no reason to suppose that they would not succeed in their claims, but it is a sad fact that employers, even if they do lose, do not actually pay the compensation due to the employee more than 50% of the time. Given the intransigence shown up to that point, I could not criticise those people at all for not wanting to take that risk.

How can anyone defend the bad employer playing the system and preventing very basic employment rights, including the right to be paid, from being enforced? It does not take a great feat of imagination to see how that attitude can inform an employer’s thinking on whether they should, for example, take steps to dismiss an employee fairly in the first place. After all, if they want rid of someone, why waste too much time on that process if they think that the person will not have the resources to challenge it afterwards? Far from the picture painted by some, this Government are actually creating a culture in which an employer can hire and fire with impunity.

Then there is the situation in which the employer becomes insolvent. The claimant has to apply to the Redundancy Payments Service for redundancy pay, but if there is no employer left to order reimbursement from and it is not recoverable from the national insurance fund, the claimant never recovers their fees. How can it be right that the state can profit from that situation? What kind of situation allows an employee to be, in effect, fined for attempting to exercise their rights in the already difficult situation in which there is an insolvency?

The GMB union has provided a very clear example of what amounts to a significant profit made off the backs of trade union membership fees. It was involved in a claim in Sheffield against a company that in February 2015 went into administration. The business was later sold to new owners, with the original company being wound up. There were redundancies, and the employment tribunal found in favour of the 48 people who brought claims in respect of a failure to consult and unfair dismissal. The claimants were supported by the GMB and three other unions, with fees totalling £13,200 being paid to issue the claims and have them heard. Although the tribunal ordered the respondent to refund the fees, there was virtually no chance of recovering them, as the legal entity had been wound up. Notably, it was only possible for those employees to bring claims because they were supported by a union to get their case before the tribunal. That is a tribute to the importance of trade union membership, but it cannot be right that trade unions or individuals have to make such payments with no avenue for recovering the cost. In that situation they were completely blameless, so why should the state penalise them?

On the question of costs, it has been suggested that one of the justifications for the fee system is that it will recoup some of the costs of the tribunal system. If that was the intention, the system has been a failure. The latest accounts from the Ministry of Justice show that in 2014-15, the net income from employment tribunal fees was £9 million and expenditure on employment tribunal services overall was £71.4 million, which means that the increase in net income from fees covers 12.5% of the cost of running the employment tribunal service. The Government seem to have been unable to quantify, in response to written questions, the extra administration and staffing costs in the tribunal service of having to administer the fees and the remission system. In reality, the gain in revenue is probably lower than 12.5%, and it has been achieved at the expense of a 69% drop in the number of claims.

There is no mention anywhere in any of the documents I have seen of the benefit to the taxpayer from the application of the recoupment regulations, which can result in an employer paying back to the taxpayer thousands of pounds—for example, in jobseeker’s allowance already paid to the claimant—which is offset against the claimant’s compensation. Such repayment is normally ordered where a tribunal has made a finding of unfair dismissal. Why is that clear benefit to the taxpayer not included in any considerations, and has anyone stopped to consider that the level of recoupment will have reduced as the level of claims has reduced—

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[Chris Stephens (Glasgow South West) (SNP)]

It is a pleasure to serve under your chairmanship, Mr Streeter. I congratulate the hon. Member for Ellesmere Port and Neston (Justin Madders) on making an excellent contribution. Like him, I believe it is clear that the introduction of fees for employment tribunals has led to a reduction in claims, and we can only conclude that that is denying workers access to justice. In April to June 2014, the first three months after the introduction of fees, there was an 81% drop in claims. Discrimination claims, for which a £1,200 fee is required, have fallen, and sex discrimination cases were down by 91% in the first year. As indicated earlier, unpaid wages claims, which attract a fee of £390, are down, often because in those cases the fee is more than the amount sought by the worker.

There is no evidence that fees are needed to prevent unfounded claims from being made; on the contrary, evidence gathered by the Trades Union Congress, Citizens Advice Scotland, Citizens Advice England and Wales, the Law Society of Scotland and Bristol and Strathclyde Universities shows that workers with genuine cases are being prevented from lodging their claims by their inability to pay the fees. That can only mean that a growing number of unlawful employment practices are going unpunished, which is detrimental to the achievements of a fair workplace. As the general secretary of Unison, Dave Prentis, said recently:

“There is stark evidence that workers are being priced out of justice and it is women, the disabled and the low-paid who are being disproportionately punished.”

[Dr Rupa Huq (Ealing Central and Acton) (Lab)]

Does the hon. Gentleman agree that we are also talking about gender discrimination, because women who are suffering from pregnancy discrimination or maternity discrimination will be afraid to take cases with a price tag of £1,200, so they will suffer in silence?

[Chris Stephens]

I agree with that, and there has been growing evidence in the last few years of pregnant workers being dismissed unfairly. The hon. Lady is absolutely correct to say that the fee of £1,200 would be a natural barrier for women workers, particularly in sectors of the economy that are traditionally low paid, such as the retail sector. It would be very difficult for someone in such circumstances to progress. The hon. Lady’s statements are backed up by the legal affairs spokesperson of Citizens Advice Scotland, who has said:

“Employment Tribunals regularly include cases where people have been un-paid or under-paid for work they have done, or cases where they have been mistreated—including bullying, racism, sexual harassment. People who have suffered such treatment surely have a right to justice, and that right should not be based on their ability to pay.”

All the evidence suggests that the review of employment tribunal fees should include an equality impact assessment. As I have indicated, I am concerned about the divisive rhetoric that we sometimes hear on workplace and trade union issues. We are told that fees were introduced to save the hard-working taxpayer money, but those who are chasing a tribunal or who wish to submit a tribunal claim are, indeed, hard-working taxpayers.

In Scotland, the administration of employment tribunals is due to be devolved under the Scotland Bill. In the Scottish Government’s programme for government, First Minister Nicola Sturgeon said:

“We will abolish fees for employment tribunals, when we are clear on how the transfer of powers and responsibilities will work. We will consult on the shape of services that can best support people’s access to employment justice as part of the transfer of the powers for Employment Tribunals to Scotland.”

That proposal is supported by Scotland’s “workers’ parliament”—the Scottish TUC’s annual congress—and by Citizens Advice Scotland. I will end with the words of the latter in welcoming the Scottish Government’s intention to abolish tribunal fees:

“So we are delighted that the government has addressed this issue, and has seen the urgency in putting it right. These fees should never have been introduced, and they need to be scrapped as soon as possible.”

I could not agree more.

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[Richard Arkless (Dumfries and Galloway) (SNP)]

Like my colleagues, I can confirm that it is a pleasure to serve under your chairmanship, Mr Streeter. Special thanks to the hon. Member for Ellesmere Port and Neston (Justin Madders) for securing what I, like his colleagues, consider to be an extremely important debate.

I rise as a member of the Scottish National party to put the SNP’s case, and I want to start by putting the issue in a Scottish context. The issues of employment law and employment tribunal fees are reserved to the Westminster Parliament. There is an expectation that clause 37 of the Scotland Bill will devolve the financial arrangements and management of employment law tribunals to Scotland. The Scottish Government have a clear policy of abolishing the fees as soon as we have the power to do so. To quote the Scottish programme for government, as my hon. Friend the Member for Glasgow South West (Chris Stephens) did, that will be done

“when we are clear on how the transfer of powers and responsibilities will work.”

The devolution of any part of the administrative justice sphere in Scotland is done through a separate Order in Council. We are yet to see whether the Government will sign off the relevant Order in Council and whether it will include the right to adjust employment tribunals, but we are working on the basis that that is what will happen.

Why does Scotland have an interest in this issue? We could argue that, if these issues are devolved, it will be for Scotland to decide whether to abolish fees. Of course, that disregards the funding arrangements between the UK and Scotland. If fees are abolished in the rest of the UK, Scotland’s funding mechanism will be increased by the extra amount the Scottish Government will have to spend in future years on employment law tribunal fees. While we have a commitment to abolish fees, therefore, unless the fiscal arrangements are correct, Scotland will have to find the money to do so from the remainder of its budget—which we are willing, at this juncture, to do, because that is clearly the moral thing to do.

As I said earlier, the imposition of employment law tribunal fees follows from the Beecroft report. The premise on which it was based was high-handed. The report stated that business must be allowed to grow and to be more efficient, but that employment law impedes that. That statement is very contentious. As I said in my intervention, simply stripping a firm of its cost liabilities and potential need to spend money does not, in itself, make that business more efficient. I would argue that if a business treats its staff correctly, the staff will treat the clients correctly, and that will make the business more productive and efficient. The premise on which the imposition of the fees was based is therefore flawed at best. This is all being done to save the £82 million or so a year that was spent on employment tribunal cases.

The upshot is that someone with a simple claim for being refused time off, or for a breach of working time regulations, faces a £160 issue fee and a £230 hearing fee. For a more serious case of discrimination for wrongful dismissal, there is a £250 issue fee and a whopping £950 hearing fee. God forbid that anyone would ever need to go to appeal, as the combined cost is £1,600 on top of what has been paid for the previous hearing. It does not take a rocket scientist to figure out that this will be a material deterrent to claimants bringing their cases.

Every litigator worth their salt—I speak with some credibility as I used to be a litigator—understands acutely that quite often the way to win a case is not to win a substantive argument, but to pile cost pressure on the other side. This is the Government trying to use a litigious tactic to pile cost pressure on claimants who, ordinarily, just want their grievances heard. It is a disgraceful course of action. The result in Scotland has been a 92% reduction in redundancy claims, an 81% reduction in sex discrimination claims, and a 90% reduction in claims for breaches of working time regulations.

Legally, through free access to employment law tribunals, we went as far as we could in making rights that protect workers absolute; now, they are not absolute. The right to not be unfairly dismissed, to be free from sex discrimination, and to be consulted on redundancy is no longer absolute. I asked the Minister what kind of message this sent out. It sends out a message that it is okay to abuse workers because, essentially, they have no course of redress, and that it is okay for the rest of the workers in that organisation to feel that their fellow workers have been marginalised. That has a direct impact on their productivity levels, wellbeing, morale and, ultimately, the financial success of the organisation for which they work. With these changes, it appears that the lower someone is on the income scale, the more inaccessible justice becomes.

I will pick up on points made by previous speakers. The hon. Member for Ellesmere Port and Neston was right to highlight that tribunals do not just award compensation. They can provide a statement of fact—of terms and conditions that give vulnerable workers clarity about their position in a company. He is also right that there has been substantial evidence to the Justice Committee—which, as a member of that Committee, I have heard—highlighting how much of a deterrent the fees are. He is right to point out that some employers will not even consider the claim until the issue fee is paid. That is piling even more cost pressure on to the vulnerable workers and works in favour of the employer. It tips the balance away from justice and towards employers for no good reason, as far as I can see.

My hon. Friend the Member for Glasgow South West rightly made the point that workers have been priced out of justice. The changes disproportionately affect women, minorities and those at the lower end of the income scale. He is also right to point out that there is wide support in Scottish civic society for the Scottish Government’s policy of abolition.

The hon. Member for Cardiff Central (Jo Stevens) made some excellent points very well. She is right to say that the policy completely makes a mockery of the Conservative party’s claims to be the party of working people, and it is not evidence-based. As with much of the legislative agenda that I have witnessed since becoming a Member in this House, particularly the Trade Union Bill, this seems to be an ideological attack with no evidence base whatever. That follows a consistent theme in the legislation that I have seen come before Parliament since joining the House in May.

[Chris Stephens]

The hon. Member for Cardiff Central (Jo Stevens) also mentioned the wealth creators. Does my hon. Friend agree with me that the genuine wealth creators in this country are low-paid, long-hours workers—many of them women—who are helping to keep the economic wheels turning, yet they are the ones under attack?

[Richard Arkless]

I completely agree with that. Any business that sees its staff as disposable units of production is headed for disaster. I go back to what I said: if businesses treat their staff properly, the staff treat customers properly. If customers are treated properly, the business will be successful. If a business is successful, there is a dividend for shareholders, which, no doubt, is the motivation of the Conservative party.

In conclusion, I urge the Minister to persuade the Government, when he takes this information back to them, that their review should conclude what the Scottish Government, Scottish civic society and Opposition party Members conclude: that they should abolish these draconian fees without delay.

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[Mr Vara]

I ask the hon. Gentleman to bear with me, as I will turn to that issue, and also to the issue of working people that has been mentioned by a number of colleagues.

Hon. Members will be aware that the Government were elected as a majority Government with a clear mandate to eliminate the budget deficit during this Parliament. That requires a responsible approach to funding public services, which must include the courts and tribunals, both now and in the future. When the Government introduced fees in employment tribunals in 2013 it was estimated that the cost of running the service was about £84 million per year. Before the introduction of fees, the whole burden of that cost was met by taxpayers. Fees were introduced to reduce the burden, and to ensure that those who were using the service and benefiting directly from it were making a reasonable contribution to the cost, when they could afford to do so.

At the time the fees were introduced, we also applied Her Majesty’s Courts and Tribunals Service fee remissions. That scheme is there to ensure that those on low incomes are not prevented from lodging a claim. Under the scheme, those who qualify may have their fees waived, either in part or in full, depending on their financial means. I am a little disappointed that although much has been made of the employment tribunal fees, only a passing reference was made to the conciliatory scheme introduced by ACAS, to which I will turn shortly.

As far as remissions are concerned, I am grateful for, and have very much taken on board, hon. Members’ practical comments, and I can assure colleagues that my officials are looking at how applications are made to see how the process can be made simpler and more user-friendly.

[Chris Stephens]

Will the Minister reassure us that he will pay particular attention to cases in which there is a claim for an illegal deduction of wages, the amount of which is lower than the fee demanded by the service?

[Mr Vara]

I will not make any instantaneous decisions. I will look at everything in the round. We are considering the matter, and the hon. Gentleman will be aware that we are undertaking a review—which I will come on to—of the whole employment tribunal fees structure, of which I am sure that matter will be a part.

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[Mr Vara]

I am giving a general analysis of the number of claims that were made to the employment tribunal. The trend of the total number of claims was declining. The hon. Lady seeks to talk about specific types of cases, and I am not going to go into that. I am talking about the general trend, because the debate and the numbers given so far have been broad and have related to the total number of applications received to employment tribunals.

[Chris Stephens]

rose—

[Richard Arkless]

rose—

[Mr Vara]

I will give way first to the hon. Member for Glasgow South West.

[Chris Stephens]

Is the Minister casting doubt on the specific research on this matter carried out by Citizens Advice Scotland, Citizens Advice for England and Wales, the TUC and others? Will he write to me with the figures on the declining number of employment tribunals prior to the introduction of fees?

[Mr Vara]

I am certainly not casting doubt on research. If the hon. Gentleman recalls, I said that I was not going to discuss specific issues and specific types of case. It is important to take things in the context of how the debate has been going so far. The hon. Member for Ellesmere Port and Neston spoke in broad-brush terms about the fees coming in and the total number of reductions.