Hard Labour

An alternative Employment Tribunal fees regime: let’s do the maths

The week before last, a ripple of excitement ran through some of the #ukemplaw Twitter community when one of its leading figures – I will spare them their blushes – mistook a blog post of mine in which I had set out some things I think the government elected in 2015 should do, including reform the ET fees regime introduced last July so as to reduce claimant fees to a nominal level, for an official policy pledge by the Labour Party. And, before the error could be corrected by its perpetrator, the fabulous Sean Jones QC (founder of this blog) had laid into the workers’ party in robust terms:

“Labour will reduce ET fees to ‘nominal’. If they do, costs of collection and remission [applications] will exceed income. Bizarre. Just abolish them.”

Which presented me with something of a dilemma. Because to suggest that Sean might be wrong is not a step taken lightly, especially by a humble policy wonk. Indeed, the very idea is so preposterous that, according to Sean, it recently caused Mrs Jones to “snort wine out of her nose”. [Actually, I think that was the opposite idea. Ed]

But … *takes big gulp of air* … I do think Sean might be wrong. Because I believe an alternative regime of nominal fees for both claimants and respondents could restore access to justice, without creating the kind of hole in the Ministry’s budget that would result from outright abolition of the current fees regime.

That hole would not be enormous: in 2012, Ministry officials indicated that they were looking to generate an annual income from fees of some £10 million. And, whilst we do not know how much the fees regime has actually generated since July – the Ministry has recently declined to answer my Freedom of Information request on that very point, on the grounds that to do so would “disrupt the [Ministry’s] consistent approach to communicating this information to the public” and might “lead to comments being taken out of context which as a result may lead to an inaccurate and misleading indication of the performance of the [Ministry]” – as if! – we can be certain that it will be somewhat less than £10 million over the first year of the fees regime, and perhaps as little as £5 million.

However, in the current fiscal environment, which we are told is likely to continue well beyond 2015, even £5 million would be hard for newly installed ministers to find from elsewhere in the Ministry’s budget (as the Treasury would no doubt insist upon, whoever is Chancellor). So, to my mind, outright abolition is simply not a realistic option and, if the current fees regime is to go – as it must – then we have to come up with an alternative way of raising up to £10 million, and probably at least £5 million, from a fees regime that does not obstruct access to justice.

So, let’s start with a nominal issue fee for single claimants of just £50. Over a full year, that would generate £1 million from  20,000 single claimants, based on the official claim statistics for Q3 of 2013/14.  But we know that the current fees regime has seriously depressed the number of claims. So let’s make a conservative assumption that the lowering of the issue fee to such a nominal level would increase the number of claims by 50 per cent. In that scenario, a nominal issue fee of just £50 would raise £1.5 million.

And, if the 30,000 claimants in the 3,000 multiple claim cases each paid a reduced fee of just £25, that would generate another £0.75 million. And why shouldn’t they each pay such a fee, if they are using the tribunal system? The trade unions and the TUC might protest, but that would be pure self-interest.

Next, a nominal fee of £50 for respondents to defend a claim would generate £1.65 million from 33,000 employer respondents (30,000 defending single claims, and 3,000 defending multiple claim cases). Perhaps slightly less, if the prospect of having to pay a £50 fee caused some employers to settle the case before doing so. Let’s say £1.6 million. And, with the introduction of Early Conciliation by Acas earlier this month, such a ‘defend’ fee for respondents would be entirely justifiable, as any employer who fails to resolve the claim via Acas is from that point on as much a ‘user’ of the tribunal system as the claimant(s).

All relatively small sums, granted, but together they add up to a fairly tidy £3.85 million.  And the cost of collecting this total sum would be relatively negligible, as the Ministry of Justice has already spent £4.4 million on the database and infrastructure for doing so. Furthermore, with claimant fees set at such a low level, it would be possible to dispense with fee remission or, at the very least, to have a much simplified remission scheme covering only the very poorest would-be claimants and/or the most simple wages claims.

Furthermore, if just one in three of the single claims, and one in two of the multiple claim cases proceeded as far as a hearing, a nominal hearing fee of just £50 for each party would generate another £1.15 million. Which brings the total to £5 million – probably sufficient to plug the hole that would be left by dispensing with the existing fees regime, and certainly well in excess of any costs associated with fee collection and administration.

However, if even this sum were not considered sufficient, then the final element in my alternative fee regime would be a ‘losing’ fee for those employers found by a tribunal to have breached the law – that is, those employers that create the need for an employment tribunal system.  Each year, about 12 per cent of all claims are successful at a hearing or result in a default judgement in favour of the claimant. That’s about 4,000 losing employers, based on the figures and assumptions above.

So a moderate ‘losing’ fee of just £250 would generate another £1 million, whilst a more hefty fee of £500 (still well below what many claimants have to pay now) would double that.  And if the employer lobby groups don’t like that, there’s an easy answer: don’t breach the law (and, if you do, at least have the sense to settle the ensuing tribunal claim before it gets to a hearing).

Yes, my figures (and assumptions) are crude. But they are no more crude than those in the Ministry’s voluminous final impact assessment (issued in May 2012) of the current fees regime, which have turned out to be way wide of the mark. And no one can predict with any accuracy what effect such a lowering of claimant fees, and the introduction of respondent fees, would have on the number of claims, hearings and judgments.

There are, of course, any number of variations on this theme. For example, if a remission scheme exempting, say, the poorest 20 per cent of claimants were considered essential, the £0.3 million in lost issue fees, and the associated administrative costs, could very easily be covered by upping my proposed ‘losing’ fee for employers found to have breached the law.  Indeed, applying the ‘polluter pays’ principle, there is a very good case for setting this ‘losing’ fee at a level far greater than the £500 suggested above.

And so, I humbly rest my case: Sean Jones might just be wrong. Another glass, Mrs Jones?