To fee, or not to fee? The question that Labour must answer soon

In recent weeks I’ve been pondering the Labour Party’s inability to say what, if anything, it plans to do about the Coalition’s employment tribunal fees if elected in 2015.  A number of shadow ministers, including Yvette Cooper and Gloria De Piero, have publicly highlighted the gross injustice of asking women who have been forced out of their job by pregnancy or maternity discrimination to shell out up to £1,200 – the equivalent of nine weeks’ statutory maternity pay – in upfront fees to bring a tribunal claim against their former employer.  And backbenchers Diana Johnson and John Cryer have each raised the issue at Prime Minister’s Questions.  But none of them have been able to say whether Labour would abolish or otherwise reform the fees regime.

No doubt this is partly due to the rigid discipline on making any policy commitment that comes with a price tag – abolishing the fees would leave a hole in the incoming Justice Secretary’s budget of up to £10 million (the sum the Ministry said in 2012 it expected to reap in fee income).  However, it may well be that the Ministry underestimated the impact of its eye-wateringly high fees on the number of claims, which appears to have fallen off a cliff since the introduction of fees in July.  So the actual loss of fee income from abolition could well be much less than £10 million.

More importantly, abolition is by no means the only option.  Back in 2012, when the Ministry was consulting on its proposed fees regime, I suggested an alternative way of generating £10 million of fee income, based on a nominal issue fee for claimants (including each claimant in a multiple claim case) and a more substantial ‘loser’ fee (or penalty) for losing employers – the ultimate ‘users’ of the tribunal system.

That suggestion did not meet with universal approval – the TUC and unions strongly resented any suggestion that their members should pay the same as an individual tribunal claimant for bringing a multiple claim case.

So, here’s another alternative regime: a nominal issue fee for claimants, together with a nominal fee for employers to defend a claim (payable when submitting the ET3 response to the claim).  That would meet the concern of employer lobby groups that would-be claimants need to be “incentivised to think through whether a formal claim really needs to be lodged”, without creating a significant barrier to justice.  And, if there are to be fees, it is entirely fair to charge employers to defend a claim.  Because, with the introduction of ‘early conciliation’ of all potential claims by Acas from April 2014, any employer who fails to resolve the claim (for free) through Acas is from that point on as much a ‘user’ of the tribunal system as the claimant.

Using the ‘steady state’ figures for claims and disposals set out in paragraphs 3.10 – 3.13 of the Ministry’s final impact assessment, I calculate that a flat-rate issue/defend fee of just £50 would generate £4.8 million.  Which could be topped up to some £6.5 million by imposing a ‘loser’ fee/penalty of say £200 on the 8,000 losing employers.  And such a simple, transparent and fair fees regime would obviate a fee remission scheme, thereby saving some £1 million in administration costs.

This basic model could of course be tweaked in any number of ways.  For example, the one in five claims that are straightforward (and mostly low-value) claims for unpaid wages could be charged a lower fee, or exempted altogether (my preference).  And the claimant and respondent employer could each be charged a nominal hearing fee if the claim proceeds that far.

But the essential point is that the price tag attached to restoring access to the employment tribunal system could be very small indeed.  Which means there really is no excuse for Labour’s reticence on the issue.  And, if shadow ministers don’t speak out soon, they might find themselves beaten to it by the Liberal Democrats, looking to differentiate themselves from their erstwhile coalition partners, and tempt back some liberal-minded voters, in the run-up to 2015.

19 thoughts on “To fee, or not to fee? The question that Labour must answer soon

  1. As an HR Director, I can tell you that any time that I have been at a tribunal, it has been due to a completely unfounded claim that has wasted thousands of pounds of time for Directors, colleagues and HR.
    One claim was made based on the fact that we didn’t sack someone who asked to be sacked in order to be eligible to claim benefits when he wanted to change location for personal reasons. Needless to say, once we had had to give our evidence, it was thrown out in 2 minutes! It cost the Company approximately £12,000 in time and costs to be at the court (5 Directors were called for a day plus prep work and legal council).
    I think there should be a fee for claimants to deter spurious claims, as they are too easy to make these days. However in order to protect those who truly need it, the fee should be at a manageable level, with the promise of increased compensation from the Employer for that cost.
    The most important thing I would recommend is that not every case should be accepted! There should be a checking process to throw out those with no legal case and this would drastically reduce costs and time wasted for the courts.

    • As someone who represents a lot of Respondent clients, I understand your frustration. However, I think the problem with using fees to deter meritless claims is that fees do not target those with weak cases but those with no money.

      The first time the Government raised the question of fees they did advance deterring the unmeritorious as the justification but then, swiftly, changed the draft.

      The Tribunal already has powers to strike out claims with no reasonable prospect of success. Cases with little reasonable prospects of success can be the subject of deposit orders (a financial disincentive properly aimed at unmeritorious claims). The new rules introduce precisely the sort of initial sift you are calling for. What is less clear is what fees add to the mix and whether the obstacle to justice it creates is worth the benefit.

      • That’s interesting to hear it from your side Sean.
        I have to admit I am lucky enough not to have been in a tribunal for 6 years (I hope due to the fact that I and employers have treated people fairly:)).
        If the spurious claims are now rejected, which was not my experience (in 3 cases out of 3), then I see no reason why those with claims should be subject to a fee at a time of stress and financial worry.
        If they do however have to have something, then it should be a nominal amount to deal with the first checking process only.

  2. I entirely agree with all your suggestions re fees. What you haven’t also mentioned is that not only do claimants have to pay huge fees but there is about a 1 in 4 chance that they will never be paid their award. Isn’t that a big enough disincentive to bring a claim in itself?
    I don’t understand why Lorna’s firm had to pay such huge fees for a spurious claim which should have been struck out, or at least a deposit ordered, if the ET3 was written properly?
    Is sifting working better or aren’t there enough cases coming through now to judge?

    • First of all, I am delighted that Lorna, Sean, Roz and I are now all in agreement. Can we have a group hug soon, please? Secondly, that Roz Watts is way off beam: there is a one in 3 chance that ‘successful’ ET claimants will never receive a penny of their award. And thirdly … oh, er, there is no thirdly.

  3. I’m intrigued by the idea of raising money at the back end of cases rather than at the front end. I think it is more consistent with maintaining access to justice for all.
    However, I have three comments on Richard’s proposed scheme.
    First, what is the justification for excluding losing claimants from this scheme? If one of the main criticisms of the current fees regime is that it inhibits would-be claimants from bringing good claims, I don’t see why an effort shouldn’t be made to inhibit claimants from bringing bad ones. More fundamentally, it is inequitable for employers alone to be bearing the financial penalty of losing. This argument is particularly important given that, from April 2014, employers will be bearing an additional risk of paying a penalty of, I think, up to £5,000 if they lose and it is found that they failed to follow some statutory procedures (I’m a bit hazy on the details). The balance is more fairly struck if claimants as well as respondents pay up if they lose.
    Second, how would one deal with identifying the winner and loser in different situations? Many cases involve more than one issue, and there could be split findings e.g. C wins unfair dismissal, R wins unlawful deduction of wages. Should each party pay £200? Or should the £200 be split between them? What if there is a high value discrimination claim and a relatively trivial holiday pay claim, and there are split findings…how does an ET approach the costs division in those cases?
    Third, I foresee a problem collecting the money (from either party) if it is payable only at the end of the case. It is a relatively small sum and many losing parties may bank on the ET being insufficiently resourced to take enforcement proceedings. It may be that the answer is to require parties to place £200 into an escrow account immediately before trial, but this raises many of the same problems that are the subject of criticism under the current regime.

    • The coming of penalties raises an interesting question. I assume that the Government will be merciless about recovering the penalties from respondents. Successful claimants, of course, find it difficult to recover their compensation. I wonder whether it would be possible to construct a scheme where the agency charged with recovering the penalties also recovers the compensation and pays it on.

      • Merciless? The government have admitted that employer penalties will be the exception rather than the rule. According to the legislation, the case has to have “aggravating” features, the meaning of which is unclear, but the minister has suggested there has to be some kind of deliberate malice rather than an honest mistake as to rights.

        As to a government agency recovering compensation for employees: it would be a step in the right direction but I suspect the costs would eat up the entire MoJ revenue from tribunal fees, causing George Osborne’s head to explode.

      • Mark, the lack of mercy is in recovering penalties imposed rather than imposing them.

        You may be right about costs, I do think we have to look at enforcement though. There is little point holding hearings and making awards if the right to compensation is meaningless in practice. It discredits the system.

      • This is really a reply to Mark Tarran’s comment below, but there doesn’t seem to be any ‘reply’ button there. I just want to say that anything with the potential to make George Osborne’s head explode has to be worth exploring, no?

    • You make a good point, James. Well, actually, you make three good points. Are you a lawyer, by any chance?

      Seriously, I happily concede that the ‘loser fee’ is perhaps the weakest (and least important) part of my suggested model. A nominal hearing fee for each party would be my preference. But I would say this: losing respondents have been found, by an ET, to have breached the law in some way, whereas a losing claimant may simply have failed to prove their case. OK, that’s a gross simplification, but I think the point stands up. And there would have to be proper safeguards – the ET would have to have discretion not to impose a ‘loser fee’, for example, or to ‘share’ the loser fee between the parties (which addresses your second point, perhaps). And I think any such ‘loser fee’ would have to be instead of the current Government’s intended penalties on losing employers where there are ‘aggravating circumstances’ – whatever that means. It wouldn’t be fair to have both.

      As for your third point – are you a pal of that Roz Watts? Non-payment of ET awards is a serious problem about which I have bored for Great Britain over the past decade. Indeed, it’s a scandal that successive justice ministers have sought to sweep under the carpet. And, as I understand it, current BIS and MoJ ministers haven’t got any idea how to enforce their penalties on losing employers from April next year (but if Jo Swinson is reading this I will happily be corrected). Which means any penalties imposed by ETs have about as much chance of being paid as ET awards do. Which means it’s all hopeless and we should all go off and set up a commune somewhere.

  4. The very sad thing about ET fees is that the loss aversion cognitive bias kicks in. Claimants with excellent cases won’t part with the fee even though the loss of the fee is greatly outweighed by the potential gain of an award or settlement. Whilst there are some spurious claims, Employment Judges are making robust use of case management powers which means those claims often go away before any liability hearing. Rational actors in the regulated free market will venue shop and opt for the lowest price venue so money claims which would have been made in the Tribunal transfer to the County Court. The fees remission scheme penalises you if you have £4k in savings. A hearing fee would swallow up a quarter of that amount.

    • Er, “loss aversion cognitive bias”? Is that the thing that will make George Osborne’s head explode? It certainly makes mine hurt. 😉

  5. Sean – I agree, the rate of non-payment of awards is a scandal and needs to be addressed. The suggestion of placing the responsibility for chasing payment onto the state rather than the individual may well result in greater recovery, given the greater resources and sanctions available to the state. Using HMRC as the collection agency could work, since it is already in the business of collecting money from employers via the tax system, and is used to dealing with those who are reluctant to cough up. Perhaps it could be empowered to levy penalties and interest for late payment.

    As for the employer penalties imposed in ET cases, my point was that I can’t see that many penalties being imposed, so even if the government is merciless in collecting them it’s not going to affect that many employers.

  6. I went to a meeting of the APPG Citizens Advice meeting at the commons today on enforcing ET awards. There was someone from BIS in the audience so I asked how financial penalties with their “parking fines” early payment discount fitted into their plans to do something about getting more claims paid. I didn’t really get an answer but all the MPs present seemed amazed the money went to the Exchequer and there was no check whether the respondent had paid the claimant first.

    On a separate point on tweaking fees, why are hearing fees not refundable if the case settles as happens in the County Court. It would be an incentive to settle claims.

    And why not have a detailed Preliminary Hearing where ACAS conciliation/ADR can be encouraged & then split the hearing fee 50/50 between the parties if they want to proceed rather than settle.

  7. I’ve never quite understood why failure to pay an award shouldn’t be a contempt of court, with the usual threat of imprisonment as the sanction. Mark’s plan to give the collection task to HMRC is a very sensible one, though.

    • In late 2012/early 2013, BIS officials (and maybe ministers) asked HMRC to take on the task of enforcing unpaid section 16 ERR Act penalties, but were rebuffed on the grounds that it was too small beer for HMRC. Ditto unpaid ET awards. All HMRC could offer was that unpaid s16 penalties could be enforced by their ‘golden circle’ of about 16 debt collection agencies that HMRC contracts with to enforce low level tax debts. BIS was considering this for both unpaid s16 penalties and unpaid ET awards, but – significantly, perhaps – no mention was made of this in the recent BIS press release on their new research on unpaid awards (and it sounds as if no mention was made of it by the BIS representative at the recent Citizens Advice APPG meeting that Paul reports on above). It is clear that much if not all of the momentum on the issue of unpaid awards came from Jo Swinson, so may be lost when she goes on maternity leave later this month. Which means it is important to support MPs like Stephen Lloyd in pressing Jo’s replacement (likely to be Jenny Willott, I’m told). And we need to press Labour too.

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