Oral evidence: Courts and tribunals fees and charges, HC 396Tuesday 17 November 2015

Oral evidence, 17 November 2015.

Witnesses

Kate Booth, Partner, Eaton Smith LLP, Sally Brett, Senior Policy Officer, Trade Union Congress, Stephen Cavalier, Chief Executive, Thompsons Solicitors, and Shantha David, Legal Officer, Unison, gave evidence.

Chair

Good morning. Thank you very much for coming along; we are very grateful to you for your time. The format will be the same as for your colleagues on the previous panel. If you would like to introduce yourselves, we will get straight into the questions. I know that you have all submitted some written evidence, which we have seen.

Kate Booth

My name is Kate Booth. I am a partner in a law firm called Eaton Smith. I represent employees and employers.

Sally Brett

I am Sally Brett. I am the senior employment rights officer at the TUC.

Stephen Cavalier

I am Stephen Cavalier, chief executive of Thompsons Solicitors.

Shantha David

I am Shantha David. I am an in-house solicitor at Unison legal services.

Chair

Thank you very much.

Marie Rimmer

You understand the purpose and the principle of the introduction of the fees and charges—basically, that there is a burden on the taxpayer. Do you accept the Ministry of Justice’s position that some of the cost of running the employment tribunal should be moved away from the taxpayer on to those who can afford it?

Sally Brett

No. As has already been said this morning, we believe that the employment tribunal system is an important public good which ensures that our basic employment rights are effective. I would like to make the point that often a division is made between taxpayers and users of employment tribunal systems, but all taxpayers are potentially users of employment tribunal systems. They are a very important backstop to ensure that basic rights such as the right to a minimum wage, rights to paid holiday, rights to time off and maternity leave and rights not to be unfairly dismissed or discriminated against are effective. Those rights bring important social and economic benefits for this country. They ensure that more people can participate in the labour market without facing unfair discrimination. They give vulnerable workers more job security and stability of income. They help to encourage a committed and engaged workforce and the retention of skilled workers. As has already been said, if there is not that ultimate sanction that employers may face if they breach employment rights, it encourages rogue employers increasingly to flout the law, which undermines and puts at a competitive disadvantage businesses that are striving to meet the employment standards or to exceed them and use good practice.

Marie Rimmer

Thank you. Would you like to comment, Stephen?

Stephen Cavalier

Yes. I will add a couple of points, if I may. First, I am not sure that it is right to say that the purpose of this was to defray the costs of the tribunal service. The statement from the Cabinet Office Minister, Mr Hancock, was that the purpose of these fees was to deter people from bringing claims. To that extent, it has obviously been successful, if you look at the statistics. I do not think that it was intended to cover the cost of tribunals. I believe that it covers something like 12% of the cost of tribunals, so it is not seeking to do that. I have not seen any analysis—I do not know whether analysis has been done—on the extra cost of administration and staffing in the tribunal service of having to administer the fees, because that was not a system tribunals had to deal with before. Presumably the handling of money will involve some extra cost in administration. Coming back to the point that Mr Howell made earlier, one consequence—perhaps unintended—of the introduction of fees and the reduction in the number of cases is that we have found that hearings are getting longer. Employers are trying to string things out in cases and, unfortunately, tribunals are listing cases for longer hearings, which is putting both parties to considerable extra cost. I am not sure that it has been a cost-effective measure.

Marie Rimmer

Shantha, would you like to comment on that?

Shantha David

Yes. I endorse what both Sally and Steve said. Part of the problem is that the intention was to reduce the cost, but what it has done is create a more inefficient tribunal system. Cases are still taking as long to be heard. Cases are listed and often go unallocated, with all the parties having to attend hearings, so we end up spending costs on barristers and solicitors and in management time for employers. The average clearance times for multiple cases are actually longer than they used to be. This has not created a more streamlined process or a better system. In fact, all that has happened is that the numbers of claims have dropped exponentially and the tribunal system continues to be inefficient, when it could be slightly better.

Marie Rimmer

Kate, you have a slightly different view.

Kate Booth

Yes, I do. Boiling it down to the principle, as you asked, if the option was between saying that we need to find more taxes in order to pay for the system or asking the people who want to access and make use of the service, I would be supportive of there being some fee that people wanting to use the employment tribunal service had to pay. My concern is that the fee is far too high and it is excluding far too many people. I am interested in Shantha David’s comment that in fact the outcome has not been that we are living with a more streamlined system. Perhaps that is where some attention needs to go.

Marie Rimmer

I have heard your comments. Do you have any recommended alternative that would allow HMCTS or the MOJ to recoup some of the revenue, should they abolish or substantially reduce employment tribunal fees, or do you believe that they should not recoup them alternatively?

Stephen Cavalier

They should abolish the fees.

Sally Brett

The contribution to the cost of running the tribunal system that fees have made is just 12.5%. That small contribution has come at the cost of a 70% decline in tribunal claims. As Steve has already said, we do not know what the cost of administering the fee system and the remission system has been. We know that the fee system and the remission system are having an impact on the efficiency of how some cases are being dealt with now within the system. I am concerned that, if we talk about reducing the fees to a level where they are not a deterrent for most claimants, the court system will get in an even smaller amount of money to contribute to the costs of running it.

Marie Rimmer

Are you saying that, in your view, what is coming in is a great cost to what would have been the appellant or the victim? Should we reduce further the amount to be paid?

Sally Brett

You could end up making a very small contribution to the cost of running the system, but you still have the cost of administering the collection of that fee.

Marie Rimmer

But your view is slightly different, Kate.

Kate Booth

I do not have enough knowledge to comment on the mechanism for recovering the costs and administering all of that. My personal view, based on the principle—which is what you asked—is that I see no reason why people wishing to access a system, in the same way that they might bring a breach of contract claim, should not have to pay something. My concern is the level we set it at.

Shantha David

The cost of setting up this whole process was also very expensive. I suppose that that was a cost to the public purse, and it is something that is not mentioned very often. It is something to bear in mind that perhaps that amount of money should not have been spent to produce a system to employ people to collect fees. What is so wrong with having an accessible statutory scheme that gives effect to employment rights for working people at no cost, as it was in the past? In my experience, no individual employee wants to sue their employer; they would rather still be in employment. If we have bad employers who do not like to manage their employees, or simply treat their employees unfairly, this becomes a question of access to justice and an entitlement to protect basic employment rights. It is not easy to give evidence in a tribunal situation. My clients are often amazed by how overwhelming it is to sit in such an environment, to have to give evidence in front of a judge and be cross-examined and so on. They often come back saying, “Gosh, that was really emotional and really hard, but I am glad we did it, because we now know that we have ensured our rights,” whatever it may be—the minimum wage, maternity rights or rights to paid annual leave, or if they have been unfairly dismissed—but it is not an easy process.

Marie Rimmer

Ministers have said that the advantage of employment tribunal fees is that they discourage weak or vexatious claims and that under the previous system many such claims were brought. What is your view on that?

Stephen Cavalier

There is absolutely no evidence for that. First, there is a conceptual point. Ministers should be clear on what the purpose of fees is. Are they intended to fund the tribunal system? In that case, they should be clear about it. If the tribunal system is to be funded by users, it should be taken into account that employers are users, as well as claimants. If it is not that and the intention is to deter claims—which I believe probably is the intention—this is not the effective way to do it. There is no evidence that it has deterred vexatious claims. You have already heard the statistics from the earlier witnesses, which I endorse. If you had such a massive drop in claims, you would expect a significant increase in the success rate if the vexatious claims were dropping out. We have not seen that at all. Moreover, I do not know that there are any statistics on the number of vexatious claims. If there are, I apologise and I would be interested to see what they say. There is an existing mechanism in place. If someone brings a claim that is frivolous, vexatious or otherwise unreasonable and is unsuccessful, the employer can apply for costs. Indeed, at earlier stages of the proceedings, the employer can apply for a pre-trial review for deposits, to deter claims that are without merit. There is simply no evidence that there are loads of these claims washing around the system. If employers are faced with vexatious claims and they are properly advised, they will oppose them. If they succeed, they will apply for costs. That is the appropriate deterrent, and it already existed.

Shantha David

You have probably seen what the president of the employment tribunals, Mr Brian Doyle, said. He suggested that only a very small percentage of claims can be identified as weak or unmeritorious and that we need to be a bit careful about the way in which we bandy around the term “vexatious” when it comes to claims. Tribunal judges have a lot of powers. They have a range of powers to deal with such claims. They can strike claims out and require deposit orders before hearings. I have been involved in hearings where I have acted for the employer, there has been an unreasonable claimant and we have got our costs back. There are systems within the tribunal that can deal with vexatious claimants, but not this sledgehammer to crack a nut approach.

Kate Booth

To look at it slightly from the other side, in my submission I say that between May and August this year 185 queries from employees came through my doors, based on an advertising scheme we were part of. A number were non-respondent after I sent them an email or message with tribunal fees in it. Of the 112 I spoke to, I myself rejected 27 for having no merits and six for being extremely low quantum and, frankly, not worth pursuing, and I think a couple were out of time. That leaves 71% that had merits and were worth allowing to cross the start line, but could not. Of the ones that I rejected, I do not believe—except in a very small number of cases—that the people themselves were pursuing a claim without merit. They thought that there might be something in it and they wanted some help. It was not the fact that they were out to cause a nuisance, although I accept that there are cases where that does occur and I have come across them.

Marie Rimmer

It has been put to us in written evidence by Peninsula Business Services that, prior to introducing fees, an unfair financial burden could fall on the respondents to claims, who could either settle or incur costs to defend against a claim. What is your comment on that?

Stephen Cavalier

I have read their submission. There appears to be absolutely no evidence for the assertion that they make in the submission. I do not see that there is any evidence whatsoever that before this system was introduced there was a high number of vexatious claims. If they found that the employers they represent were faced with claims without merit, my advice would be that they should defend the claims, deal with them appropriately and, if they were without merit and vexatious, apply for costs, which is the existing regime. I do not see any evidence there of vexatious claims or of the tribunal fees making a change to that.

Marie Rimmer

Does anyone else have any comments?

Kate Booth

There is certainly a high burden to the employer who has to defend a claim. That is part of life as a business, but there are products out there, in terms of legal expenses insurance that a number of my clients take advantage of, so there are ways to safeguard against those costs.

Shantha David

One of my clients has also written in to this inquiry. He brought a claim of unfair dismissal at a time when there were no fees. He had been unfairly dismissed; he had two sons in education and bills to pay, so he felt that he had to bring the claim. He tells me that, if he had had this fee, he would not have been able to bring such a claim. The risk he was taking was that he was taking on a large local authority, which had significant legal resources—public money—that allowed it to fund the case against him. Financially, the system was weighted heavily against him and in favour of the employer, so I do not accept Peninsula’s points about the respondent struggling. In his particular case, we took over the claim. The case deals with a point of law, so it is now at the Employment Appeal Tribunal. He tells me categorically that he could not have afforded it—making new law and trying to get his job back—if we had not been supporting him.

Chair

Thank you very much. You do not have to answer every question if you think that your bit has already been covered. Mr Howell wants to follow up on that point.

John Howell

You mentioned that the root of this is charging costs on an unsuccessful claimant, in this case. My experience of employment tribunals is that they are very unwilling to apportion costs to claimants, because of the difficulty of being seen to charge people who cannot afford it.

Stephen Cavalier

It is largely because they do not accept that the claim was frivolous, vexatious or otherwise unreasonable. I come back to the point that Mr Davies made—

John Howell

No. This is at the end of a process in which the claimant has not proved their case and should have costs made against them. The judges are unwilling to make those costs.

Stephen Cavalier

First, they have to establish that it was frivolous, vexatious or otherwise unreasonable. To come back to the point that Mr Davies raised earlier, the fact that a case is unsuccessful does not mean that it was frivolous or vexatious. There will be a proportion of claims that are unsuccessful in any form of judicial system; that is only to be expected. First, that rather makes the point that there are not that many frivolous, vexatious or otherwise unreasonable claims. Secondly, yes, there will be a point about the affordability of it. There would not be much point in awarding costs against someone who was not able to meet those costs, but that is a minority of cases. A far bigger issue, as has been mentioned by witnesses already, is the proportion of tribunal awards that are not enforced against employers, where people have won a valid claim and have not ended up with their compensation at the end of it.

Chair

Mr Cavalier, let us say that you have a breach of contract case. You may not have the money, but even if it is not vexatious you give it a run in court and you lose, you expect to pay the costs. What is wrong with that in the employment area?

Stephen Cavalier

It is an interesting point, Mr Neill. My view on this may not be the same as that of my colleagues. Of course, it is worth making the point that there is a distinction between fees, which are paid to the tribunal service, and costs, which are paid between the parties. Personally, I favour a system where costs follow the event in employment tribunals. If you are successful in your claim, you get your costs from the other side; if you are unsuccessful, the employer gets their costs back. You can insure against that, or there would be arrangements that trade unions and others would put in place. That is a personal view. It may not be shared across the trade union movement, but that deals with your vexatious point, as opposed to your funding of tribunals point.

Chair

That is helpful.

Kate Booth

If I may reply to that myself, thinking of the employer clients I act for and the occasions on which I have tried to recover costs, it was extremely difficult with the mechanisms that we have in place now. It is a significant point that, if you got an award of costs, trying to recover that from the claimant would be very difficult. It would be something of a moral victory, not a recoupment of the expenditure that you had had as an employer.

Sally Brett

Can I make a point on costs? Cost shifting is not something that we support. I have heard from trade unions that increasingly employers are threatening that they will apply for a costs order against an individual. We often deal with individuals who are taking on large employers, with big legal services departments, employing expensive barristers. They threaten and try to deter that individual from standing up for justice.

Chair

It is not cost shifting to say that costs follow the event, is it?

Sally Brett

No, sorry. We also believe that, where a case is not proved to be weak or frivolous but has just been unsuccessful, it does not mean that there was no merit in its being determined in court, and often—

Chair

I understand that.

Sally Brett

Often in many of the cases that trade unions take, because they are involved very early in the workplace—the individual is advised very early on and they attempt to resolve issues in the workplace—it tends to be the very weak, vexatious or frivolous claims that are screened out. The ones that often go all the way to tribunal are those where there are quite complicated issues to determine—quite grey areas. There is a benefit to those being heard at tribunal and being determined by a judge.

Chair

I get that. Equally, if you do that—leaving aside figures—logic says that, if you lose, the costs go against you.

Sally Brett

Yes, but we are dealing with individual workers who have lost their jobs and experienced discrimination. They will often struggle to regain employment.

Chair

An individual who has been on the receiving end of a breach of contract is in the same position, aren’t they?

Andy McDonald

The new fee remission scheme has been in for only a couple of weeks. I do not know whether anybody has experienced it—please don’t answer this if you haven’t—but is it now easy enough for applicants to understand and complete?

Shantha David

The form is a bit better; that’s for sure. I welcome the new form. However, it has not changed the thresholds and things remain the same. If you recall, in the original equality impact assessment back in July 2012, the idea was that 53% of claimants would get full or partial remission. We understand that that figure is 21%, but looking slightly further at the statistics, the recent analysis from the MOJ looks at cases rather than individual claimants, and they say that 21% of all cases have received remission. If you look at claimants, as the equality impact assessment did, the figure is that more like 9% of all claimants are getting their fees back. That is a very small amount, and certainly not the 53% that was envisaged back in 2012.

Andy McDonald

Would anybody else like to respond on fees? If you do not feel that you are able to comment, please don’t.

Sally Brett

A couple of the trade unions I have spoken to said that, when they have applied for remission on behalf of a client, they very rarely received it.

Andy McDonald

Can I direct this question to Sally and Shantha, in particular? You criticised the fact that a claimant’s partner’s income is included in the gross monthly income test. What is wrong with including household income for the purposes of remission?

Sally Brett

It is potentially sex discriminatory. The lower-earning partner in a household is frequently the woman, particularly if there are children and she has taken the primary responsibility for caring and reduced her hours. We know that often when women want to reduce their hours to accommodate caring responsibilities they have to take lower-paid, part-time work. They then experience discrimination or a problem at work and lose their job. They are in a position where, effectively, they have to get their partner’s permission to help to fund their case and take it forward. As we heard this morning, pregnancy and maternity discrimination is still rife; it is still an issue that I hear frequently. Very rarely do I come across women who are willing, with a new baby coming along and the expense of that, to stand up and take a case to tribunal. You have women who have lost their jobs, which has a big impact on household income. If they are still in employment and have experienced a problem, they are about to experience a big drop to statutory pay levels, but their partner is in work. With all the pressures on the household, they have to persuade their partner to allow them to take a case.

Shantha David

Which may or may not succeed. I have an actual example of some of our clients who are on national minimum wage and are trying to bring claims for unpaid wages. They do not have things like their payslips, because they are not being paid properly or they have not received payslips, so they cannot access the remission system, or their partner is also on national minimum wage, which means that they earn more than the threshold. The threshold is £24,660. Two people earning national minimum wage will earn about £26,000, so they would not be entitled to any remission for a claim to enforce rest breaks, for example. If a person who is a carer was not getting their rest breaks or not being paid their wages, they would not be entitled to remission. We are talking about people who are earning approximately £13,000 to £14,000.

Kate Booth

As an addendum to that, before coming here, I did my own calculation, based on information from the Office for National Statistics as to average income, average household expenditure and average rent or mortgage payments. If you take all those averages and there are two people earning in a family with two children, it will take them three and a third months to save up for their hearing fees, and that is taking the partner’s income into account. It will take a significant length of time.

Andy McDonald

Finally, from the evidence, I turn to issues of redundancy payments. It seems that if an employer becomes insolvent and is not able to pay redundancy payments, the employee applies to the redundancy payments office. They might be paid, but they may need to issue employment tribunal proceedings. There is an issue fee of £150 and then a court fee as well. They will not get those fees back. Is that right? What is the extent of the issue, and what should we do to put it right?

Stephen Cavalier

Perhaps I can deal with that, Mr McDonald. Yes, you are right. To correct an error in our evidence, for which I apologise, it is an issue fee of £160 and a hearing fee of £230. Quite often the redundancy payments service will require the employee—the claimant—to take the case to the tribunal to establish that the employer is insolvent and they are entitled to the funds. Often that will need to go to a hearing, which may be uncontested, but it will be a hearing none the less. At the conclusion of that, they will successfully recover their redundancy payment and other moneys due to them under the statutory arrangements protective award, but they will be out of pocket by the £390 that they will have had to pay because of the fees. That seems to me utterly unjust and unfair. Really they should be reimbursed those fees by the service as well or the fees should not apply in circumstances where they are clearly not recoverable. I hope that the Justice Committee would have some influence over a specific matter such as that and over the fact that Government Departments are among the worst offenders for not participating in early conciliation through ACAS. We have found that in our experience Government Departments do not engage in early conciliation. The worst among those offenders is the National Offender Management Service, which is very poor at engaging. If there is any influence that the Committee could bring to bear on that—I know that there are distinguished former Government lawyers among us—that would be very helpful.

Chair

That is very timely. Mr Howell wants to come in on conciliation.

John Howell

The alternative dispute resolution approach to this has not been a great success, has it? Why is that? What can be done to make it a success?

Kate Booth

I sit on both sides of the fence. When I advise an employer, why would they engage in early conciliation? You wait for the employee to pay a fee. Ultimately you want to call their bluff—are they prepared to put their money where their mouth is?—so you sit back and see whether they do it. There is absolutely no incentive to engage in it early, unless you know that you are going to go down. Why would you?

Sally Brett

I endorse that. From what we hear from our trade unions, it is often the case that employers, and some Government Departments, do not engage until the hearing fee has been paid. If the individual has paid the hearing fee and there is then a settlement—serious discussions are undertaken, a settlement is reached and the hearing does not go ahead—there is no automatic refund of that hearing fee to the individual.

Stephen Cavalier

I am a strong supporter of early conciliation; it is an excellent idea. It is a shame that it was not introduced separately from any fee system. If it had been introduced first and we could see how it operated in isolation, I suspect that it would have resolved a significant number of claims at that stage, not least because many unrepresented claimants, who will not necessarily be aware of the strength of their claims, could have that discussion with ACAS, which can give them a realistic assessment of whether or not it is worth proceeding. As Kate and Sally said, unfortunately the introduction of fees has had the opposite effect. Employers sit on their hands and do not engage.

Shantha David

I endorse everything that has been said so far, but in some circumstances—for example, in a transfer of undertakings-type situation—early conciliation may not work. You might have one respondent who says, “Yes, there was a transfer,” while the other respondent says, “There wasn’t a transfer.” Unfortunately, that is the end of that, and there is no early conciliation.

Chair

We have a bit of a time constraint. Let us try to get through as quickly as we can.

Victoria Prentis

We touched briefly—I think most of you were here—on the European convention point. I wonder whether you could give us the benefit of your experience. Do you still think there is a problem with effective access to justice? Is that the sort of thing you would consider litigating in the near future?

Stephen Cavalier

It is certainly a problem. It is arguable that it is a breach of article 6, on access to justice. It is arguable that it is discrimination under article 14 as well. It is arguable that there are breaches of EU law about remedies being effective, proportionate and dissuasive.

Victoria Prentis

But there was a problem finding claimants.

Stephen Cavalier

Yes. That was the position Unison found itself in, in relation to the first judicial review. The courts have tended to take the view that, unless you have an actual live claimant who has lost out, you have a higher hurdle to satisfy. Of course, if you wait for that you run the risk of being too late; the court may well say that you should have brought your claim earlier. I would not necessarily advocate that one should always go to litigation in these circumstances, but there are profound issues. It is very worrying that the Government have made a change to the ministerial code to remove the obligation on the Government to comply with international law and standards. That is very worrying in the context of this provision and various other pieces of legislation.

Sally Brett

Although the Unison case was not successful, the judges in the case made comments about how the drop in tribunal cases was sufficiently startling for there to be a more thorough investigation. They said that, given such a large drop, it was likely that within that there were people who did not just decide that they did not want to take the risk but who genuinely could not pay. We believe that there is still an arguable case that it has led to problems with access to justice and, potentially, discrimination problems, given the huge drop in discrimination claims.

Shantha David

There should be an effective remedy to EU rights. We can see, for example, that in the last published set of statistics there were approximately 800 sex discrimination claims. Compare that with the same quarter two years previously, when there were no fees: about 6,000-odd claims were lodged at that time. Either we say that there were 5,400 women per quarter who had nothing else to do but bring claims, or we say that we are missing out on all those valid claims. If you multiply that by nine, we are missing out on approximately 45,000 or 50,000-odd claims—women who have not had access to the tribunal system.

Victoria Prentis

But clearly people did not feel strongly enough to bring claims. You could not find the right claimants between you, with all your experience and access to people.

Shantha David

This is obviously the subject matter of legal proceedings, so perhaps—

Victoria Prentis

Finished legal proceedings.

Shantha David

Not quite.

Victoria Prentis

Okay.

Shantha David

Perhaps we should wait until the court—

Victoria Prentis

Can I ask an utterly unrelated question? You might know the answer. How many people, vaguely, are supported by their union in an employment tribunal? What proportion of claimants? Does anybody know?

Stephen Cavalier

I do not know what the actual proportion is.

Victoria Prentis

Sorry—it was just something I had written in my notes.

Stephen Cavalier

The statistics are that something like 75% of claimants are represented by their trade union, a lawyer or other adviser. Within that, I do not know what the trade union proportion is. What we do not know is what proportion of employers are represented by lawyers. I think that it is a very high proportion, which is what really contributes to the cost of the system.

Alberto Costa

To what extent can the fall in claims to the employment tribunal service be attributed to claimants instead bringing claims for breach of contract to the county court?

Shantha David

Only certain types of claims—breach of contract, for example—can go to the county court system. The only forum for everything else is the employment tribunals. Was that your question?

Alberto Costa

Yes. Let me ask the solicitors specifically. In what circumstances would you advise claimants to bring actions in the county court?

Kate Booth

It is not something that I have done with my clients.

Stephen Cavalier

Obviously, you are a solicitor.

Shantha David

I am a solicitor.

Stephen Cavalier

We have certainly not experienced a big switch. We are not advising people to bring claims in the county court, rather than in employment tribunals, unless there is a good reason for doing so. If it is a substantial claim and it is a breach of contract that would exceed the compensation limits in the employment tribunal, obviously you would go to the county court. In the county court you also have a fees regime and a high small claims limit, which means that there is no cost recovery in that forum either. We certainly have not seen a mass shift from tribunals to county courts.

Alberto Costa

Specifically for a firm that is well known as a claimant firm, what percentage of claims prior to the introduction of the fees were brought in the county court in respect of employment matters?

Stephen Cavalier

A very small proportion. That would remain the case.

Shantha David

If you are still in employment, the only forum for you is the county court. The employment tribunal is available to you for a breach of contract claim only if you have left employment. That is still the correct forum.

Alberto Costa

Do you have any comment on why the proportion of successful claims does not appear to have risen since the introduction of employment tribunal fees?

Stephen Cavalier

Because the introduction of tribunal fees has deterred all claimants across the board, and has not been successful in deterring vexatious claims.

Alberto Costa

I have heard figures of a drop of around 80% in the number of employment tribunal claims being issued. Would you agree with that percentage?

Sally Brett

Across the board?

Alberto Costa

Yes.

Sally Brett

Everyone uses different figures, depending on what periods they are comparing—

Alberto Costa

What is the figure across the United Kingdom?

Sally Brett

Seventy per cent.

Stephen Cavalier

There has been a 70% drop. Those are the latest tribunal service figures.

Alberto Costa

Can I ask a question of Stephen Cavalier? As the chief executive of a well-known claimant firm, would you think that such a drop in business is affecting the way in which chief executives in firms like yours view this particular Government policy?

Stephen Cavalier

There are probably not many firms like ours with chief executives, so it is difficult to make a comparison, but—

Alberto Costa

Well, managing partners of many firms in your position.

Stephen Cavalier

Actually, it is interesting that the concerns expressed are not expressed just by claimant firms. They are concerns that valid claims, people with potentially valid claims, are being shut out of the system. Although we are a claimant firm, occasionally we represent respondents, when trade unions have claims brought against them by employees or by members. We have had claims brought against ourselves as well, and have dealt with those appropriately. Indeed, I was involved and was a witness in a case brought against us by a vexatious litigant who was subsequently declared a vexatious litigant, so there are methods for dealing with that. A bigger problem—to come back to a point that was raised by a couple of members of the Committee—is that tribunal cases are taking too long and are too complicated, and that employers, by and large, are stringing them out. The 2010 to 2015 Government removed discrimination questionnaires, which enabled the gathering of evidence at the start of the case but also enabled claimants to be aware of whether or not they had a case. They may have not got a job and thought that the job had gone to, say, a white man, and that they should have got it, but when they look through the documentation in the questionnaire, they may find that there were perfectly valid reasons for that, so the case goes no further. That procedure is no longer available to them. The only way of testing it out is for them to go through the process, ending up with a long hearing and an expensive case for all concerned.

Alberto Costa

Can I bring you back to the question that I asked? If you have seen a 70% drop in business in firms like yours in this particular area, it must be an issue of concern for you. Surely it must impact on the view that chief executives or managing partners of firms like yours take on this Government policy.

Stephen Cavalier

Genuinely, we are not interested in promoting large numbers of employment tribunal claims. We would much rather that matters were resolved in the workplace, with trade union representatives. What we are concerned about is not the drop in business for us but the number of people who are no longer able to bring claims. That is true. There is a drop in claims even among trade union members, where the unions themselves are providing loans to assist with the fees. Believe me, employment tribunal business is not something where one would actively seek to encourage a large number of claims.

Chair

Out of interest, do you notice anything around appeals? Has there or has there not been any change in the number of cases being taken to appeal since the fee structure changed?

Stephen Cavalier

I have not. Have you?

Shantha David

Not particularly, no.

Stephen Cavalier

No, I do not think so. There is obviously a fee again at that level. There is an impact. Judges are not very keen, at any level, on litigants in person. That tends to lead to rather more protracted cases, but I suppose you would expect a lawyer to say that, wouldn’t you?

Chair

Some of us have been there. Does anyone have anything to add?

Marie Rimmer

I have a question on employment tribunal awards not being paid in full. You said that the figure was less than 50%. Do you think that the enforcement of tribunal awards is an issue for us to consider, along with the employment tribunal fees?

Shantha David

It is a very important thing to consider, given that you then have to go off to the county court to enforce the award. It would be better if tribunals had some sort of power.

Chair

You had already made that point to some degree, but it has been reinforced. Thank you very much for your time. We are very grateful to you. Examination of Witnesses

Witnesses

James Potts, Legal Services Solicitor, Peninsula Business Services Ltd, and Michael Mealing, Chair, Employment Policy Unit, Federation of Small Businesses, gave evidence.

Chair

Gentlemen, thank you for your time. Thanks for coming to give evidence to us. Would you like to introduce yourselves?

Michael Mealing

Thank you. The opportunity to talk to you is much appreciated. I am Michael Mealing. I am the chairman of the employment committee of the Federation of Small Businesses and an honorary officer of the federation. I have a day job. My business involvements have included sitting as a panel member on employment tribunals.

James Potts

I am James Potts. I am an in-house solicitor employed by Peninsula Business Services. During the course of our work, we represent respondents only in the employment tribunal.

Chair

We have seen some of the evidence, and you have heard some of what has been said in the course of today. From an employer’s point of view, it must be desirable that good employers are not undermined by those who treat their workforce badly and, in effect, create an unfair level of competition. Does the drop in claims give you any concerns, from an employer’s point of view? Is it all to the good that there are fewer claims? Is it purely because they were unmeritorious, or are there risks from your angle?

Michael Mealing

One ought to draw the distinction between small business and large business. As members of the Committee have already pointed out, small businesses are indeed small. The Federation of Small Businesses has nearly 200,000 members. Where our members employ people, the average number is only seven. There are hundreds of thousands of businesses like that in the UK; indeed, most businesses are small businesses. A microbusiness of that nature will not have the specialist resources that a large business has and will not necessarily have the financial resources to retain external expertise, so an employment tribunal application against it can be a truly horrendous event, particularly so if—rightly or wrongly—the employer believes that no unfairness has occurred. Because it is so expensive to resist a weak claim, I am afraid that it is becoming very common to buy off weak claims, as it is cheaper to do so than to resist them successfully. That is the primary reason why we welcome the drop in claims. The early conciliation facility is, in many ways, doing the same job—weak claims are being bought off—but claimants are aware of the fees and would certainly be less hesitant about going forward without them. The federation therefore welcomed the introduction of fees. At the time, we would have preferred to see lower fees but a more robust remission system, because it is still possible for people—depending on their domestic circumstances—who are relatively adequately remunerated to have a no-cost option of going to an employment tribunal. The other thing that would help the situation from our perspective would be a change in the presidential guidance that employment judges get, in terms of the application of the facilities that have been mentioned to award costs, to ask for deposits and so on.

Chair

To make that more robust, I imagine, from your point of view.

Michael Mealing

Indeed.

Chair

For your average member, how much management time for a small business is taken up to deal with a contested employment claim?

Michael Mealing

That is exactly the point. We think of an average cost of £8,000 to retain legal representation to fight a case, but often, if a business has only a handful of employees, the cost to the business of the employer—the owner-manager—being tied up in an employment tribunal for days on end and spending many hours preparing the case is even greater, because they are the business’s greatest asset.

Chair

Mr Potts, do you have anything to add?

James Potts

We would say that the introduction of fees has had a positive effect, as have the other legislative changes that have been introduced in addition to the implementation of fees. We welcomed the reduction in the number of claims on behalf of our clients. Earlier, we heard some statements about the number of vexatious claims. I would perhaps avoid using the word “vexatious”. The word that we used in our written submission was “speculative”. We think that the introduction of fees has had a positive effect in relation to the reduction in the number of speculative claims that have been raised. In that sense, I would say that we do not have any particular concern about the reduction in the numbers.

Andy McDonald

Mr Mealing may be able to answer this, Chair. I wonder whether he encourages his members to embrace early conciliation in the process. Is there active encouragement for people to talk and conciliate?

Michael Mealing

No. We would take a neutral stance on that.

Andy McDonald

What would your stance be on costs following the event in tribunal cases?

Michael Mealing

As has come out already, it is relatively unusual for costs to be awarded. Our view is that the unwillingness of employment judges to award costs is unfair, particularly to small businesses, which will have suffered enormously from appearing and finding unreasonable behaviour on the part of the claimant.

Andy McDonald

Would you therefore support the principle of changing the cost regime in employment tribunals to have costs following the event?

Michael Mealing

We would.

Andy McDonald

We received a lot of evidence that remissions do not safeguard access to justice. For example, we heard the example of a pregnant woman, with a claim for unlawful pregnancy-related dismissal, who had saved just over £3,000 to pay for the expense of having the baby. That meant that she was not eligible for remission but was unable realistically to pay the fees. What is your comment on that?

James Potts

We do not have any particular involvement in the remission system. We are not au fait with the particular nuances of that system, so we would not necessarily be able to comment on specific cases. As we heard, there have been improvements to the remission system very recently. We believe that that is having a positive effect. The remission system is one of a number of options that might be available to claimants in those circumstances, who might be able to benefit from after-the-event insurance or from financing from either a firm of solicitors or union representation in order to assist with bringing the claim. We do not necessarily believe that remission is the only option available to a claimant in those circumstances.

Andy McDonald

Would you be supportive of costs following the event in employment tribunals?

James Potts

No, I do not think that I would. I am not saying that the current system is perfect by any means, but it is certainly having a much more positive effect. We would say that the implementation of fees is much more beneficial than costs after the event.

Andy McDonald

Not costs after the event—costs following the event, with the successful party recovering their costs from the unsuccessful party in the employment tribunal. Would that be a change for the good?

James Potts

Not necessarily. In our view, there has to be an element of financial risk that the claimant has to undertake in order to bring the claim before—

Andy McDonald

Mr Potts, I am sorry to interrupt, but if the claimant loses they will be responsible for the respondent’s costs. That is the risk they would run. Is that not a step in the right direction?

James Potts

I understand the point, but it is the matter of being after the event, as opposed to taking the initial financial risk before deciding to issue the claim.

Andy McDonald

The fees do that.

James Potts

They do, yes.

Victoria Prentis

You told us about the financial cost of responding to a claim and a little about the business cost of people being tied up—giving evidence and so on. Do you want to comment on the emotional and other cost to business?

Michael Mealing

Small businesses are all about personal relationships. A handful of people working in one location do not have the problems of communication and so on that can happen in a larger organisation. Yes, some FSB members have found a tribunal a very stressful activity. Again, they are encouraged to settle, whether or not they feel that any unfairness has been involved.

James Potts

I would go further. Some of the cases I have dealt with have involved relationships that break down between family members, in some situations, or even very close personal relationships. It is not necessarily the costs associated with simply defending the claim itself but the costs of the breakdown of that relationship. Claims that are issued by brothers against brothers or daughters against mothers have an everlasting effect on that relationship. There is a perception that claims that are issued in the employment tribunal are against respondents with huge HR departments—that they are a large corporate entity. Often that is not the case.

John Howell

In the last session, you heard the witnesses say that the existence of fees was inhibiting the advancement of alternative dispute resolutions. Do you agree with that? If not, would you say how we can make sure that alternative dispute resolutions are part of the system?

Michael Mealing

There is some truth in the fact that alternative dispute resolution has not been as successful as we hoped. Things may well change over time. There are still a significant number of cases resolved; I understand from the House of Commons Library briefing on tribunal fees that ACAS reckon to have settled 22% of the cases they were involved in. That is a significant number, which we hope will grow. I believe that the relationship between a free conciliation service and a fee-paying justice system is appropriate.

James Potts

We would say that early conciliation has had a really positive effect. The success rate ACAS referred to is not necessarily borne out in the early conciliation work that we do as a company. We would regard a successful early conciliation matter to be one where the claimant is informed by somebody neutral and independent, through ACAS, that perhaps there are issues with the claim that do not warrant the airing of those particular issues in the employment tribunal, so a claimant may choose, through early conciliation, not to pursue a claim that might struggle to have success. We would regard that as a successful early conciliation matter. There are other areas of alternative dispute resolution we have not touched on. There has been a rise in the prevalence of settlement agreements to resolve workplace disputes. In our experience, those have become increasingly popular. There is also a rise in mediation services available to employers and employees to resolve the rising number of workplace disputes that do not get to the line of the employment tribunal, when once they might have.

Chair

The obligation is to notify ACAS. Could it be strengthened by putting some obligation upon the parties genuinely to engage and to comply?

Michael Mealing

It is very difficult to be obliged genuinely to engage. The alternative dispute resolution depends very much on both parties, or at least one party, being very keen to reach a settlement.

Chair

On good will.

Michael Mealing

If that is totally absent, I cannot see the advantage of making them go there just to go through the motions.

Chair

I understand that. Mr Potts, you mentioned other forms of mediation and other types of alternative dispute resolution. Looking at the legal services market more generally, are there other changes that you might see as developing alternative ways of access to justice? If so, what are they?

James Potts

In terms of employment law?

Chair

Yes, for example. Are contingency fees an issue that might arise?

James Potts

Contingency fees are more prevalent among firms of solicitors who represent claimants. We have some experience of them, albeit anecdotally, but I am not sure that I am able to comment on that particular issue.

Chair

The converse point is that that could encourage speculative litigation. What is your thought on that, Mr Mealing?

Michael Mealing

As my colleague stressed in his written submission, there is encouragement on some potential claimants to become claimants.

Chair

You would regard that as undesirable, I take it.

Michael Mealing

Yes.

Andy McDonald

I wonder whether you think there would be any merit in having a legal aid system that was contingent—where people had to pass the merits test before a legal aid board and, if successful in recovery, would pay the money back to the taxpayer. Would that be a good way of going about funding litigation, not only in employment tribunals but elsewhere?

Michael Mealing

It is a very interesting idea. Small business is interested in fairness. As I indicated earlier, our main concern is the unfairness of a totally blameless employer incurring huge cost, stress or both in being taken to a tribunal or, indeed, being pressurised to pay one’s way out of it. Anything that looks at the merits of a case would be welcome. Obviously, it should not be so stringent that people are reluctant to use it.

Mr Hanson

You said “a totally blameless employer”. What is your assessment of the numbers of totally blameless employers that you would quantify in that answer?

Michael Mealing

It is an imperfect world—there are seldom blameless people in any situation—but there is some indication from the success rates for employment tribunal cases that take place. A professionally advised employer should not lose a case. They should have settled it before they got there.

Mr Hanson

The key point the Committee would want to look at is the number of claims that are now not progressing because of the fees. How many of those claims would you assess as not having merit?

Michael Mealing

I could not offer a finite number. There are still a significant number of claims that get through to a tribunal—there is no doubt about that—but I would not like to hazard a percentage. My feeling is that there are significant numbers of claims that have very little chance of success. That is evidenced by the advent of the early conciliation facility, where, as well as leaning on employers to pay up, ACAS can persuade claimants not to proceed.

Chair

Are you able to say in broad terms how many employers you think would take the view, “I will take a commercial decision here. It is not worth defending this case, even though I think I have a good case”?

Michael Mealing

My belief is that a majority would.

Chair

A majority?

Michael Mealing

Of course, unfortunately, if you pay for something, you get more of it. As a result, more claims come forward.

Chair

I understand that. Do you have any statistics as to the cost? We talked about the emotional cost, but there is a financial cost to the small business sector.

Michael Mealing

We have done some research that suggests that the financial cost is £8,000, on average, but the point came out earlier that, if cases are getting longer, the cost to everyone, including the state, increases. That is particularly true where a small employer is retaining professional representation.

Alberto Costa

This is a question for Mr Potts. I understand that your organisation has argued that there are two main indications that employment tribunal fees are not discouraging claimants from pursuing legitimate claims. I understand that Peninsula has stated that the drop in employment tribunal claims has not been accompanied by a commensurate rise in the number of cases being brought in an alternative jurisdiction where the fees would be cheaper, such as the civil courts. Isn’t it the case, as we heard in earlier evidence; that some claims, such as claims for pregnancy-related detriment or dismissal, must be brought to the employment tribunal and that therefore it is not surprising that we have not seen a commensurate rise in claims brought in alternative jurisdictions?

James Potts

We would argue that the focus is more on the type 1 claims we spoke about earlier—simple wages claims or claims for notice pay; things of that nature—which could perhaps be brought in an alternative jurisdiction, such as the county court. Despite the statistics saying that the type 1 claims are the ones that have been deterred by the introduction of fees, we have not seen a commensurate rise in the number of claims being brought in the alternative jurisdiction. I take your point, but I would argue that it is at the lower end of the scale.

Marie Rimmer

The number of claims being brought to an employment tribunal has dropped significantly. To what extent do you think the employment tribunal fees have affected that number?

Michael Mealing

They have undoubtedly affected the number, but I do not think that it is a situation where there is just one factor in play. The number of claims can reflect changes in economic activity or prosperity. It has affected the weaker claims disproportionately, because early conciliation and the fact of having to pay make people think very carefully. Previously, until fees were introduced, it was a no-cost option, as far as the claimant was concerned. The fundamental principle that we would advocate is that there should always be some level of fee. We can argue about what that should be, but there should be some financial risk attached to the ability to take an employer to a judicial situation and incur really substantial costs for a small employer.

Marie Rimmer

Success rates have remained roughly the same since the fees were introduced. Is it not fair to say that employment tribunal fees have not discouraged unmeritorious claims being brought?

Michael Mealing

They have not discouraged all the claims. Personally, I believe that some will have been discouraged, but some people want their day in court and the claim will be heard.

Marie Rimmer

It has been suggested that if would-be claimants have recently lost their job they are less likely to bring a claim, because they feel that they cannot afford it, even if they have some savings. What is your comment on that? They feel that they have no access.

Michael Mealing

Obviously unemployment is a disaster in many situations, but it is not always so. Some people leave employment having been made redundant, with quite a large financial settlement. Some people move into another job very quickly, or have the prospect of doing so. I still feel that the proper test is that it should cost something to have access to the court system.

Marie Rimmer

What about people who have lost their job and were on the minimum wage and therefore do not have anything at the back of them? Do you feel that they still have access to this avenue of justice?

Michael Mealing

I do not think that the remission system is perfect at the moment. There should be a remission system, but I still feel that it is not appropriate for this to be a totally no-cost option.

James Potts

We would say that access to justice is through the remission system that is in place and the alternative ways to fund a claim for somebody in those circumstances that might be available to them to bring that claim. Despite the implementation of fees, we would still say that there really is not an access to justice issue.

Marie Rimmer

Thank you for that.

Chair

Do other colleagues have questions for the witnesses? Gentlemen, thank you very much indeed. I am grateful to you for your evidence. Of course, the written submissions are taken into account as well. Thank you for your time; we are much obliged to you. Oral evidence: Courts and tribunals fees and charges, HC 396 31