As the employment litigation landscape continues to change, Eversheds LLP conducted a timely survey in the quest to find out what the practical implications will mean. Here, Geoffrey Mead, Partner at Eversheds LLP, summarises the key findings.
The survey responses suggested that over 40 percent of employers have experienced a reduction in Employment Tribunal claims since the introduction of fees. Respondents’ comments indicate that fees are acting as a significant deterrent, but that the impact of fees is reduced in a unionised workforce, in which unions may support claims.
A quick reminder of the Government implemented fee categories: In broad terms, claims alleging discrimination, detriment and unfair dismissal are allocated to the higher type “B” fees. Single claimants, raising such claims, are liable for an issue fee of £250, payable on presentation of a claim, and a hearing fee of £950, payable on a claim being listed for final hearing. Allegations of wage deductions, refusals to allow time off and other “simpler” claims, attract the lower type, “A” fee. The issue fee and hearing fee for type A claims are £160 and £230, respectively. A remission system provides full or partial waiver of fees for those who cannot afford to pay. The Employment Tribunal Rules include a provision allowing the Tribunal to order that the unsuccessful party reimburse the fees paid by the successful party.
As you are probably aware, the latest statistics from the Employment Tribunal Service for the period October to December 2013 support this result. The number of claims received in October to December 2013 was 9,801, 79 percent fewer than in the same period in 2012.
The Ministry of Justice warns against drawing early conclusions however, pointing out that some claims, due to the fee-charging system, will make a delayed appearance in the statistics. But what is interesting is how each type of claim has been effected. It is perhaps not surprising that employers considered unfair dismissal claims to have reduced most. The introduction of fees may be a greater deterrent for those bringing unfair dismissal complaints than for those bringing discrimination claims. Relevant factors are likely to be the amount of potential award, there being no financial cap on discrimination compensation. Also, perceived value for money may have a bearing as unfair dismissal claims are, generally speaking, disposed of more quickly than discrimination claims.
The hearing fee was believed by the Government to provide a second opportunity to settle cases pre-hearing. However, our study results indicate that this has not been the case, with only eight percent of respondents indicating that the requirement to pay a hearing fee encouraged settlement. A third state that the hearing fee has made no difference at all to settlement. Of the remainder, five percent believed the hearing fee acted as a deterrent to settlement.For those recruited on or after 6 April 2012, the qualifying period for unfair dismissal protection increased to two years. The change was widely supported by employers, but concerns remained that increasing the qualifying period might encourage new litigation, with employees seeking to raise complaints on grounds for which no qualifying periods apply, such as whistle-blowing and discrimination. Almost 45 percent of respondents believe the extension of the qualifying period has led to a reduction in claims. However, 20 percent noted an increase in claim types which have no requisite qualifying period of employment, a significant increase.
New Rules governing Employment Tribunal practice and procedure across England, Wales and Scotland have applied to all ongoing and new cases since 29 July 2013. Notably, as a result of the new initial sift, every case is reviewed on paper by an Employment Judge at the outset, to confirm there are arguable complaints and defences within the Tribunal’s jurisdiction and to allow for case management orders. The express requirement in the Rules is that the sift process should identify weak claims and encourage more robust case management. Claim and response forms which are inadequate or unclear are likely to be challenged by a Judge, encouraging far closer scrutiny by authors of what is included. Forty-one percent of respondents suggest that the new Rules have helped to address weak claims,and comments received suggested that there may be more cases listed for strike out and/or deposit orders as a result of the sift. However, the MOJ’s statistics show that less than one percent of claims were disposed of by Employment Judges dismissing the claim or any part of a claim, where she or he considers that it has no reasonable prospect of success, or that the Tribunal has no jurisdiction to hear the claim.
The new Rules place an obligation on Tribunals, wherever practicable and appropriate, to encourage the use by the parties of the services of ACAS, judicial or other mediation, or other means of resolving their disputes by agreement.Judicial mediation is an alternative form of dispute resolution which offers parties the opportunity and flexibility to agree terms that a Tribunal would not be able to offer, including non-financial measures such as an apology, a reference or outplacement counselling. And 73 percent of respondents expressed the view that mediation was always or sometimes successful, and 40 percent confirmed that they had attempted mediation during the last year. Similarly, recent statistics demonstrate that judicial mediation has a success rate of in England and Wales in excess of 70 percent.
The main reason given for not using mediation was that it was not considered suitable. Interestingly, only three percent of respondents gave cost as a reason for not using mediation, probably because the cost of defending a claim in the Employment Tribunal is also significant. Just less than a third of respondents saw the recently introduced £600 fee for judicial mediation, which is payable by the respondent, as a barrier to judicial mediation, though 68 percent of those questioned felt the fee would make them more likely to use private mediators such as ACAS. Of course, those mediators will also have a cost, which itself will often be higher than that of judicial mediation. And 16 percent of respondents suggested there was evidence of Tribunals encouraging mediation and other means of resolving their disputes. This is a significant finding, as Tribunals will only suggest dispute resolution if it is appropriate. Responses also suggest there is an increased likelihood of mediation or settlement being discussed at Preliminary Hearings, which reflects the practice of Tribunals to raise willingness to engage in judicial mediation in case management for suitable cases (usually those listed for three days or more).
Early conciliation and employer penalties
Early conciliation (EC) and the new discretionary power for Employment Tribunals to impose a financial penalty on employers who lose a claim (in addition to any compensation) will come into effect on 6 April 2014. Under EC, most prospective claimants will have to contact ACAS before they can present a claim. If a prospective claimant consents, ACAS will make contact with their employer and will seek to promote settlement for one calendar month. EC appears to be a popular measure with over 80 percent of respondents, suggesting that they will consider its use in some or all of the disputes they face. Clearly, there are advantages to seeking to resolve disputes at an early stage, including significant potential cost savings. Importantly, issues identified during the EC System process will not restrict or bind claimants, in terms of future allegations, if they go on to commence proceedings. The process will accordingly give employers an indication of the issues in dispute, but may not be comprehensive.
Employer penalties
In respect of claims presented on or after 6 April, Tribunals will have the power to order losing employers to pay a penalty to the Secretary of State where the employer’s breach of the rights to which the claim relates has one or more aggravating features. The value of such a penalty will be 50 percent of any financial award, with a minimum amount of £100 and maximum of £5,000. The penalty will be reduced by 50 percent if paid within 21 days. There may be a lack of awareness that this provision applies from April 2014, or a degree of complacency that the little-understood “aggravating features” will not apply, as the survey reveals that only a third of organisations has taken preparatory steps. Despite employers’ receiving fewer claims, none will surely wish to risk additional penalty and the adverse publicity which will inevitably follow the first penalties imposed, yet 66 percent of employers admit to taking no practical steps, such as reviewing disciplinary and training needs, to prepare for this change.
That Unison’s recent challenge was unsuccessful means that the fees regime will remain unaffected for the time being at least. However, the High Court left the door open to a fresh legal challenge in the future. We must now wait to see whether such a challenge will be made, given that – at the time of the hearing – the court felt there was insufficient evidence to support Unison’s challenge. That being the case, the long-term future of the fees regime is not yet secure. For those claims which do proceed, it seems likely employers who lose in tribunal, or who choose to settle cases early, will need to pick up the costs of at least some of those fees. Employers will also need to guard against the financial burden, not to mention potential stigma, of employer penalties.
