Caspar Glyn QC, Schona Jolly QC and Sian McKinley consider the implications of today’s seismic decision from the Supreme Court which ruled that ET fees are unlawful: R (on the application of UNISON) v Lord Chancellor  UKSC 51.
Lord Reed, delivering the lead judgment, held the Employment Tribunals and the Employment Appeal Tribunal Fees Order 2013, SI 2013/1893 (“the Fees Order”) was unlawful under both domestic law and EU law, as it has the effect of preventing access to justice, and must be quashed.
It is of some consequence that the Court considered first the position under English law. This may prove to be particularly important in a post-Brexit (and so post-EU) landscape. The Court considered two similar but distinct principles of constitutional law were of particular importance: (1) the constitutional right of access to justice, and (2) the principle that statutory rights should not be hindered or obstructed by subordinate legislation passed under another Act of Parliament.
The Supreme Court emphasised the importance of access to the courts and its fundamental role in the rule of law with considerable force. Courts exist in order to ensure laws (whether Acts of Parliament or the common law) are applied and enforced, and to ensure the government carries out its functions within the law. Without unimpeded access to the courts, the Supreme Court unanimously held, “laws are liable to become a dead letter, the work done by Parliament may be rendered nugatory, and the democratic election of Members of Parliament may become a meaningless charade.”
The Supreme Court was scathing, and pointed, about those who think that the courts system is “merely a public service like any other”. In our own experience, this fundamental misconception of the courts system as a public service has pervaded the ET system to its detriment. For example, the tribunal service budget cuts have restricted the number of employment judges available to hear cases, and is leading to a reduction in hearing centres. Another example is the requirement for ETs to hear cases within 26 weeks of the claim being issued which leads to preliminary hearing listed sometimes before an ET3 has been submitted. Genuine efforts to improve the courts and tribunals are to be welcomed, but they cannot be considered in isolation of the particular need and value of the court and tribunal system. Nor can targets designed to improve the speed of administration of justice become no more than a tick-box exercise.
The Supreme Court was deeply critical of the view that the provision of those services is of value only to the parties involved and lawyers and court staff who are paid to be there. Nor did it accept settlement was always a desirable goal. Access to the courts can resolve legal important questions of genuine uncertainty, for example in equal pay claims. . The big takeaway point is that unless there is a remedy, the right is meaningless. Access to the courts is fundamental to ensure that the rights conferred by Parliament are given effect. Rights would be merely window dressing and the enforcement of important rights would be locked up behind an unaffordable paywall.
Having established the constitutional principles in domestic law, Lord Reed then considered whether there was a real risk that people effectively will be prevented from having access to justice. In order for the fees to be lawful, they have to be set at a level that everyone can afford, taking into account the availability of remission. There is a salutary reminder in the judgment that “affordable” means fees can reasonably be afforded. Where households on low to middle incomes can only afford fees by sacrificing (or postponing) the ordinary and reasonable expenditure required to maintain what would generally be regarded as an acceptable standard of living for substantial periods of time, the fees cannot be regarded as affordable.
Notably Lord Reed also accepted that ET fees could prevent access to justice if they render it futile or irrational to bring a claim. He referred to the many claims in ETs which do not seek any financial award or seek only modest amounts. If, for example, fees of £390 have to be paid in order to pursue a claim worth £500 (such as the median award in claims for unlawful deductions from wages), no sensible person will pursue the claim unless he can be virtually certain that he will succeed in his claim, that the award will include the reimbursement of the fees, and that the award will be satisfied in full. In reality those conditions will rarely be met.
The evidence before the Supreme Court was of a “sharp, substantial and sustained fall” in the number of claims. The Court concluded that a significant number of people who would otherwise have brought claims have found the fees to be unaffordable and that ET fees had had a particularly deterrent effect on the bringing of claims of low monetary value. Lord Reid reminded us that it was “necessary to bear in mind that the use which people make of ETs is governed more by circumstances than by choice.” For all these reasons, the Court unanimously found that ET fees effectively prevent access to justice, and are therefore unlawful
Having cordoned off the matter decisively under domestic law principles, the recourse to EU law seems almost supplementary, although of considerable importance and assessment. That has particular implications for the protection of rights post-Brexit. The Court is keen to demonstrate that fundamental rights can be protected through both the principles of Parliamentary sovereignty and through common law. Lord Reed nevertheless considered the position under EU law. He accepted that the principle of effective judicial protection (found in the ECHR and the Charter on Fundamental Rights of the EU) could be limited, but only if the limitation respects the essence of that right and is a proportionate means of achieving the legitimate aims pursued. Given the findings under domestic law, the limitation imposed on EU rights by ET fees were disproportionate. ET fees are therefore unlawful pursuant to EU law as well.
In a similar fashion, the consideration of discrimination became almost artificial, as Lady Hale recognised, given the previous findings that the whole Fees Order could not be justified. But the judgment on indirect discrimination contains a stern, but polite, warning to the Lord Chancellor that he will no doubt wish to avoid any potentially unlawful discrimination in any replacement Order.
Analysis and implications for employment law
The Supreme Court ruled the Fees Order was unlawful ab initio and must be quashed with immediate effect. At the time of writing, the ET website had stopped accepting payment of fees, although it was still accepting claims. This is fantastic news for the many workers not paid the wages that they are owed, who do not receive their full holiday pay, and for women sacked because they are pregnant or challenging pay equality in the workplace. Perhaps individuals would have challenged the companies in the gig economy faster had they been able to afford to enforce their rights. .
This is also good news for those claimants who have brought claims since July 2013 and paid the fees. Following the judgment, the Ministry of Justice pledged to “put in place arrangements to refund those who have paid”. How this will operate in practice and how it will be funded remains to be seen.
Inevitably, the decision raises a number of questions about the ‘what now’. Firstly, a series of decisions in the EAT have held that the unsuccessful party may be ordered to pay any ET fees paid by the successful party. Will the Ministry of Justice reimburse those respondents who paid tribunal fees of claimants following successful ET claims? Surely that must follow. Administratively, though, this is likely to be timely and tricky.
Secondly, what does this decision mean for those individuals who were unable to afford to bring ET claims and where limitation has expired? What about individuals who had brought claims but those claims were rejected for non-payment or incorrect payment of fees, such as those claimants in Farmah whose claims were dismissed? We anticipate there may now be a number of claims being issued which are out of time, with applications that it was “not reasonably practicable” to bring the claim earlier because of the prohibitive cost of the fees, or that it is now just and equitable to extend time. How successful they will be in practice remains to be determined, and no doubt on the basis of extensive proof where possible.
What about individuals who had brought claims but those claims were rejected for non-payment or incorrect payment of fees, such as those claimants in Farmah whose claims were dismissed? There is now no real abuse in the breach of Rule 9 of the Employment Tribunal Rules and no substantial reason not to waive such a breach under Rule 6 – those applications should be a dead rubber. The Tribunal system will now reap the reward of the EAT’s decision and groan under the weight of thousands of separate additional Claim forms that will now need to be issued, for free, in multiple cases for no good reason, other than to eliminate any Farmah-related risk, until the position is settled.
We believe this decision is also good for the employment tribunal system which is being undermined by the cuts to its resources. This Supreme Court judgment puts the role of ETs in ensuring effective protection of statutory rights at the front and centre of its judgment. As Lord Reed noted, ETs were intended to be an inexpensive and informal forum to which claimants came because of circumstances rather than choice. Claimants are often low paid or in vulnerable financial positions, and frequently unrepresented. Although this is not unique to ETs, even the highest fees in the County Court for small claims were well below the ET fees for type B claims. Denying claimants access to the tribunal system prevents the employment tribunal system from carrying out its role.
We anticipate an increase in the number of ET1s issued in future. However, we do not believe this decision is bad for employers. The fear that this opens the door to a spike in malicious or vexatious claims is unwarranted. Lady Hale, in her judgment, made the excellent point that ET fees deter those with meritorious claims in the same way as claimants with bad cases. Since the introduction of ET fees, the number of claims fell by approximately 70% but the proportion of successful claims has not risen. In fact, it has decreased by up to 3%. This decision is bad news for bad business that have been able to ride roughshod over worker’s rights but good news for good businesses. The playing field is level again and businesses who respect their workers’ rights will no longer be undercut by others treating workers badly.
The real loser from this decision is the government. The judgment of Lord Reed systematically dismantles the government’s reasons for introducing ET fees.
The principal stated aim of the introduction of fees was to transfer part of the cost burden of the tribunals from taxpayers to users of their services. Lord Reed noted the evidence that ET fees were making a much less significant contribution to costs recovery than had been expected. Lord Reed was particularly damning about an error the government had made during a consultation in January 2017 and repeated in submission on behalf of the Lord Chancellor, namely the belief that higher fees would result in more money recovered. He rejected this with strong words:
“it is elementary economics, and plain common sense, that the revenue derived from the supply of services is not maximised by maximising the price. In order to obtain the maximum revenue, it is necessary to identify the optimal price, which depends on the price elasticity of demand. In the present case, it is clear that the fees were not set at the optimal price: the price elasticity of demand was greatly underestimated”.
The government’s stated secondary objective was to deter the bringing of unmeritorious claims. Again Lord Reed set out the government’s own evidence which showed the proportion of successful claims has been consistently lower since fees were introduced, while the proportion of unsuccessful claims has been consistently higher.
Finally Lord Reed dealt with the government’s stated third objective, namely to encourage the earlier settlement of disputes. Again this was rejected on the evidence: The proportion of cases settled through Acas has slightly decreased since fees were introduced.
In noting that the right of access to justice, under both domestic and EU law, is not restricted to the right to bring successful claims. The Court appeared to criticise implicitly the removal of the statutory pre-claim discrimination questionnaire in 2013. It appears the Supreme Court took into account that the removal of the pre-claim questionnaire made it difficult for prospective claimants to access the merits of a claim before issuing an ET1 and incurring fees. None of this reflects well on the government at a time when it is promising to maintain workers’ rights post-Brexit.
It is not an exaggeration to describe this decision as monumental, not just for employment and constitutional lawyers, but for everyone who works in the UK. It is a striking endorsement of the Court’s ability to protect socio-economic employment rights provided by Parliament and through EU law, through a fierce protection of the constitutional right of access to justice. Paragraphs 6Given some of the Lord Chancellor’s submissions, it is rather ironic that this judgment has value for more than just the parties and lawyers involved.
Key to Lord Reed’s judgment is the proposition that fundamental rights, such as the right to access to justice, derive from English common law. Paragraphs 66-68 will be compulsory reading on the rule of law and access to justice. At paragraphs 74 and 75, Lord Reed quotes from Magna Carta and legal commentaries from the seventeenth and eighteenth centuries. This primary reliance on common law to protect fundamental rights, as opposed to the jurisprudence of the CJEU or ECtHR, will be important for the treatment of socio-economic rights post Brexit.
Lord Reed’s reliance on the principle taken from domestic law that “Any hindrance or impediment on the access to justice requires clear authorisation by Parliament” is to be underlined and remembered. Just as Parliament is due to debate the EU (Notification of Withdrawal) Bill in September, this is a warning shot from the Court as to the importance of Parliamentary sovereignty for an executive who seeks to overstep its powers and infringe fundamental rights through delegated legislation.
The Supreme Court has put down a marker of the approach it intends to take towards the protection of fundamental rights. The current government (and any future government) would do well to take heed.