Friday 13th July 2012 at 4:10pm

Fees; some tinkering at the edges but the worst wrongs remain

The government published today its response to the public consultation on Employment Tribunal fees. The story has reached the news, together with the government’s planned introduction date of “summer 2013″ (which, if nothing else, contradicts the general practice in employment law of only making new changes from April or October of any year).

The government’s ostensible justification for fees has shifted to some extent. At one time the primary reason given for fees was that they would reduce the number of weak claims, but obviously this was wrong – they will reduce the total number of claims (60% of which overall are of course won by claimants), but there is no real reason to think that the axe will fall harder on the claims. Now, the primary justification for fees is austerity; fees are necessary to make the system pay for itself, or more accurately start paying for itself. The government accepts that the proposed fees are too low to achieve that, and has structured into its proposals plans to increase fees hereafter.

The majority of those responding to the Consultation opposed fees in principle and fees only for claimants (the document reports that the for most of the proposals around 67% of those responding were against); but the Coalition proposes to press on regardless.

Daniel Barnett has published this summary of the amount of fees, which is a valuable simplification of several tables in the document:

“level 1 claims (the very straightforward ones such as unlawful deductions – there is a very long list in the Response Document) – £160 issue fee; £230 hearing fee

level 2 claims (pretty much everything else) – £250 issue fee; £950 hearing fee

Employment Appeal Tribunal – £400 appeal fee; £1,200 hearing fee

there are several other fees, eg £60 for an application to dismiss following settlement and £600 for judicial mediation”

Without having checked back against the original consultation paper, these fees do just seem a little lower to me than those in the consultation document, for which I suppose we should all be grateful.

Also, the government has dropped its discriminatory and nasty plan to nudge discrimination claimants in particular towards agreeing a capped award at the outset in return for a slightly lower fee.

Save for those modest changes, fees are to be introduced without concession.

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Wednesday 16th May 2012 at 6:00am

Fees and costs: what they may mean for unions

Over the last few weeks, I’ve been blogging about the Coalition’s reforms to the Employment Tribunal system, and how they will change a system which is already weighted in favour of employers. I’ve suggested that many Claimants’ individual complaints would have better outcomes if the workers concerned were to pursue their cases collectively rather than individually.

Today, I wanted to post something on the impact of the Coalition’s reforms on trade unions as collective representatives of workers.

My starting point is that the present emphasis on individual representation has all sorts of defects from the perspective of union democracy.

Individual litigation is an altered form of an original dispute between worker and employer. The dispute is taken out of the workplace and put before a Judge, with representatives to speak on behalf of both sides. As the conflict is taken away from the workplace, the opportunities for workplace representatives to control the legal running of a case become dramatically reduced.

There is no union rep watching over the union full-timer when they tell the union’s solicitor what the case involves.

No union rep is present when the solicitor advises a client on how to advance their claim – even if (as sometimes happens) the issue is whether to reduce the worker’s criticisms of their managers (and de-politicise the claim).

The union rep is not present int he Tribunal when the union’s barrister asks questions of witnesses or puts final submissions to the Tribunal.

Many legal representatives would welcome the involvement of trade unionists who know the workplace and the individual managers far better than we do; in practice we rarely, if ever, get the chance to have that dialogue.

Now, seeing the system from the point of view of unions as a whole:

The present system barely keeps unions “in the game” of offering tribunal representation to their members. The reason is that union subs are simply too low to sustain the calls that a union can expect to have made on it.

There are very few unions that charge more than £10 per month or so in subs; and (as I show in my book) there are almost no unions that set aside more than £10 per members per year in their legal budgets (the reason the proportion is low, is that most of what a union does is to operate as a membership and negotiation body; these roles takes the bulk of the funds). This £10 has to cover all the legal services on which a member might call – often personal injury claims, as well sometimes as criminal, copyright or general civil cases.

Even if all of the £10 was set aside for the Tribunal, that would mean that each member was contributing around something like a three-hundredth of the likely cost of representation in a one-day Tribunal claim.

Many unions recruit people on the basis of a promise, sometimes open, sometimes more hinted at than real, that where workers get into difficulty, the union will support them. But the increasing experience of union members is that union are unable to deliver in the promise, and so (as I document in my book) there is a growing tendency for members of union to sue, either because union support has been refused, or sometimes because the union’s advice was faulty.

The Coalition reforms are going to exacerbate this problem in two ways:

1) They increase the amount of costs that can be ordered and will make “costs” more pervasive in the system – the last 12 months has seen more EAT decisions on costs than probably the past 5 years altogether – and no doubt this picture will get worse. Undoubtedly, this will put a financial pressure on unions, as the funder of litigation, to settle good cases at an under-value.

2) The amount at which fees have been set is, from the unions’ perspective, punitively high. Per case they make Tribunals roughly 3-4 times more expensive than the county courts; and they put the sole burden of paying the fees on one side – the Claimant.

A friend reports a conversation with the head of the legal department at a medium-size white-collar union. The union has a budget, to cover its solicitors’ salaries and any other litigation costs, of around £100k per year. On the volume of claims they presently issue (the large majority of which they then settle, quickly): every penny of their present legal budget would be taken up by the hearing fees, not leaving a single penny for retaining an in-house solicitor, or doing any work on the cases once they had been issued.

What will that union do? Stop offering Tribunal representation? Or cut its non-legal budget by more than 10% to make good the shortfall?

There are going to be some very painful discussions taking place in the next few months and years.

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Monday 5th March 2012 at 9:00am

Charging Fees in Employment Tribunals (2)

In my last post, I said that I would respond here to the government’s proposals that claimants should in future bear the entire cost of starting Tribunals claims; and that if claimants underestimate the potential value of their claims they should be stopped from receiving the full value of the claims later.

Who should pay?
The consultation document suggests that workers should pay the costs of Tribunal claims, for the following reasons:

“When a claim commences it can only be the claimant who initially pays the fee. The employment tribunals incur cost as soon as the claim form is submitted. The respondent is not formally aware of the proceedings until the tribunal sends notification and therefore cannot be asked to pay the initial fee. A claim received without the correct fee, (or proof of eligibility for a remission considered in section 5), will not be properly made and will not be accepted.”

The government goes on to acknowledge that only asking one side to pay fees is a lop-sided proposal – in that only side bears the initial cost – but this is to be remedied by asking the losing party (whoever that is) to pay the costs at the end. If that is the employer, the employer will compensate the worker in due course.

This proposal is unjust for three main reasons:

First, the majority of workers in the UK work for companies that employ more than 50 people. The majority of claimants are unemployed workers. (Generally, those with grievances who remain in work don’t bring Tribunal claims, for the obvious reason that they don’t want to be sacked). The typical Tribunal claim involves a company whose spare income outweighs the spare income of the claimant many times over. In two of the three main types of Tribunal claims (i.e. wages and dismissal claims) workers “win” in half of all cases or more. In other words: the proposal front-loads the financial risk of litigation onto the party least well equipped to bear that risk, and without even the justification that they are most likely to lose.

Second, the rationale for charging claimants rather than respondents is administrative efficiency. But it is simple nonsense to write that respondents can’t be asked to pay the initial fee as they don’t know there is a claim until they see it. Of course they don’t. But there is no good reason to charge the initial fee on the receipt of the claimant’s ET1 form: it could just as easily be charged on receipt of the respondent’s ET3 form.

Third: the government proposes to balance the unfairness of asking only claimants to pay the issuing fee by providing that if claimants win they will get the money back.

The difficulty here is that at present many employers don’t pay when they lose their cases. The reason they don’t pay is that Tribunal enforcement mechanisms have historically been very weak. The last research on the topic (Adams, Moore, Gore and Brown, Research into Enforcement of Employment Tribunal Awards in England and Wales (Ministry of Justice Research Services 9/09, May 2009) suggested that 47% of Respondents did not pay the Tribunal claim within 6 weeks of the decision (i.e. the point at which they become liable for interest) and 31% do not pay within 12 months – i.e. at all.

So under the government’s system, a worker bringing an unfair dismissal claim (for which the median eventual award is c£5000, and the prospects of winning are c50%) is expected to frontload the risk by paying total hearing and issuing fees of £1400 which even if they win they only have 70% chance of ever getting back.

i.e. to bring a claim, a worker should have to pay two thirds of its entire commercial value upfront.

Why should the poorest party in the hearing be forced to carry that sort of risk?

Capping Tribunal awards

The last part of the fees proposal on which I want to comment is that the Coalition proposes that in future when workers submit their claims, they should be required to decide whether their total claim shall be in excess of £30,000; if so, they will be required to pay a higher fee; where they do not pay that fee, this cap shall apply.

The proposal would be a dramatic change from the present system, under which Claimant representatives are given the opportunity to estimate the value of the claim, but by and large do not do so.

The reasons for this are nothing to do with the merits of a claim or the perfidy of Claimant representatives. They are rather because the two major determinants of the value of an unfair dismissal or a discrimination claim are (i) what the worker earned in their last employment, and (ii) how long it takes them to obtain a new job.

Invariably, even the best advised claimant knows (i) but not (ii).

Another factor here is that the claimant also does not know the date of the hearing. The unacknowledged, but general, practice of the Tribunal is to be much more ready to put a value on past rather than future losses.

The reason for this, again, is unstated but obvious. If a worker is dismissed on 1 January 2011 and their case is heard on 1 January 2012, the Tribunal can know for definite whether they have found work and can assess their efforts to date. If the worker then says it will take them another year to find a job, but in fact it takes them 6 months – or indeed 18 months – there is no real provision to disturb what was intended to be a final judgment.

The length of time it takes to get from initial claim to merits hearing can be (exceptionally, in a very simple unfair dismissal claim heard in a part of the country where the system is relatively efficient) as little as 6 months, it can on the other hand takes as much as 2 years (especially if there are preliminary hearings) and where there are appeals the time between hearing and remedy can be in excess of 5 years.

Where workers leave tribunals with awards of £40,000 or £50,000 this is their “real” loss. This is some (but never all) the money that they would have been paid had they remained in work.

To say to the Claimant at the start – here is a financial incentive to cap your claim at a value which may be less than half your real loss – is grotesque.

It is a very long way from justice.

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Friday 2nd March 2012 at 3:50pm

Charging Fees in Employment Tribunals (1)

Tuesday 6 March is the deadline for responses to the Ministry of Justice’s consultation on fees in the Employment Tribunal and at the EAT.

The first point to note is that the consultation will be about the amount of fees rather than the principle of fees. The government has not consulted on the principle of fee charging and has no plans to consult on it. This alone is probably the biggest single change to the Tribunal system since the unfair dismissal jurisdiction was introduced in 1971, and the government has no intention of asking whether fees should be introduced. The government’s assumption is of course that, if it did ask, an overwhelming majority of those responding would be opposed.

For my book, I looked back to the deliberations of the Donovan Commission which introduce the modern Tribunal system. It is noteworthy that while Donovan deliberated many of the key features of the present-day system it never occurred to Donovan or any of his Commissioners that fees should be charged for what they originally termed a “dismissals tribunal”.

The Commissioners sought to establish an “easily accessible, informal, speedy and inexpensive” Tribunal (Report of the Royal Commission on Trade Unions and Employers Associations 1965-1968 (Cmnd 3623), para 572).

Had the Commissioners encountered today’s system, with its many informal obstacles to claimants’ rights (including lawyers’ fees, the stress of litigation, and the diminished prospects of claimants obtaining any work thereafter) they would have been horrified and would have sought the reform of the system in the exact opposite direction to the changes now proposed by government.

The MOJ’s consultation seeks views on 3 key issues:

1) Should there be a separate issuing and hearing fee?
2) Should claimants bear the cost of starting the claim?
3) If claimants underestimate the potential value of their claim should they be stopped from receiving its full value later?

I’ll address the first of these issues here and engage with the others in a further post.

Separate issuing and hearing fees

At the start of the consultation document Jonathan Djanogly MP writes, “employers complain that, at its worst, the operation of the current system can be a one way bet against them, with parties inadequately incentivised to think through whether a formal claim really needs to be lodged, or whether it could be settled in other ways such as conciliation, mediation or informal discussions.”

The first point to notice is the phrase “employers complain…”. One rationale for this specific proposal, and for document as whole, is to alter the Tribunal system in ways which are intended to benefit employers at employee’s expense.

Second, although the proposal is cast as being about incentivising settlement; it will be noted that a large number of the other proposals in the document are likely to disincentivise settlement: for example, it is suggested that if the parties decide to mediate their claim and seek judicial assistance, they should pay £750 for a mediation service which is presently free.

Third, in a crude “game theory” approach to litigation, having separate issuing and hearing fees “might” incentivise settlement, in the sense that both parties will have a pecuniary interest in settling the case rather than proceeding to a full hearing.

But, the proposal needs to be considered in light of the absolute amounts that the coalition is proposing should be charged:

Wages claim: issuing fee £150, hearing fee £250
Dismissal claim: issuing fee £200, hearing fee £1200
Discrimination claim: issuing fee: £250, hearing fee £1250

I don’t know of any research on what awards wages claims typically attract (from the annual ET figures we can see only that a relatively high proportion of them succeed), but I would be amazed if much more than 50% of wages claims actually resulted in an award excess of £1000.

Many wages claims it should also be noted are brought against employers whose primary defence is along the lines of “I know you did the work, and I really should pay you, but I am strapped for cash” (whether the companies are in fact strapped, or not).

As a result, around 30% of employers don’t pay Tribunal awards (see Adams, Moore, Gore and Brown, Research into Enforcement of Employment Tribunal Awards in England and Wales (Ministry of Justice Research Services 9/09, May 2009, which is the most recent research on the subject. It was on the Ministry of Justice website until recently, but unfortunately appears to have been taken down).

So, rather than incentivising settlement, the real purpose of the dual fee (once the fees are set at this amount), is to disincentivise the claim itself. A rational economic calculator, sitting on a debt of c£1000, with c70% success at the Tribunal, and only around 70% chance of actually being paid even if the claim succeedds would think something like the following

“I am owed £1000. But when I consider that I only have a 70% chance of success at the hearing and a 70% chance of being paid if I win … I reckon that if I take my claim to the Tribunal it’s real value is as little as £500.”

“On those odds Fee 1 – the issuing fee – may just about be affordable – in that it “may” convince my employer that I’m serious and that they have to pay me something.”

“But Fee 2 – the hearing fee – is getting to the point where it would be ludicrous to gamble further. Even if I win at the end, and that will take time and effort, there is too much risk that I will end up with less money than I had at the beginning.”

It also has to be remembered that very many wages claims aren’t even for as much as £1000.

Certainly, when I worked at a London Law Centre, the typical wages claimant was something earning more like £200 per week, and the typical scenario giving rise to their claim was a failure to pay notice pay – ie the typical claim had a value of just (say) £200-£400 – at which point paying a hearing fee of £250 on top of an issuing fee of £150 would be still less attractive.

It is hard to resist the conclusion that the government’s purpose in introducing Tribunal fees is to say to those wretched employers who don’t pay their staff wages that they have the full authority of the Coalition in so doing.

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Tuesday 1st November 2011 at 10:49am

Tribunal of the boss

George Osborne used his speech to the Tory party conference to announce that in future employment tribunals will charge fees to hear claims. Under his proposals, claimants will have to pay £250 to issue a tribunal claim, and a further £1000 to have the claim heard. Employers defending a claim will pay nothing.

The proposed fee is punitive: it is around ten times more than it would cost to issue a similar claim in the county courts, on which the tribunals are modelled.

To understand the sheer malice of the announcement, it must be borne in mind that over a third of all tribunal claims in any year are claims for unpaid wages. Many involve employers simply refusing to pay their workers the wages that are owed to them. Around 70 percent of wages claims are won by the workers bringing them.

The ground was prepared with the help of a press campaign to the effect that most tribunal claims are vexatious (but around 60 percent of all claims, whether for wages, unfair dismissal or discrimination, succeed at a final hearing) and that the claimants are rogue former employees receiving pay-outs in several tens of thousands (the median award in dismissal claims is less than £5,000). Meanwhile, other proposals are anticipated to extend the time that an employee has to be in work before they can bring an unfair dismissal claim to two years, and to make it easier for companies to require unsuccessful claimants to pay the employer’s legal costs.

The tribunal system is far from perfect. Its over-reliance on litigation pushes power upwards in a union and away from the rank and file. Prospects are better when workers strike to prevent dismissals or discrimination.

That said, the proposals will reduce tribunal litigation on the bosses’ terms. Osborne’s message to employers is simple: don’t pay your workers – they won’t be able to afford to sue you.

(This article was first published in Socialist Review)

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