‘No fee no tribunal’ – biggest employment reforms in 25 years get underway

The milestones are designed to reduce the burgeoning costs on the employment tribunal system, lower the volume of claims – and help small and medium-sized businesses.

Following the abject failure of the last significant overhaul of the system in 2004 – when dispute resolution procedures enabling warring parties to resolve their differences before being allowed to pursue claims were brought in and subsequently repealed in 2009 – employment specialist Andrew Lightburn from hlw Keeble Hawson questions if the reforms will help employers.

From yesterday simple ‘Type A’ claims such as wages or more complex ‘Type B’ claims such as unfair dismissal, discrimination and whistleblowing will cost £160 and £230 respectively – with claimants also having to pay further fees of £250 and £950 respectively for Type A and Type B cases.

However, applicants who receive certain welfare benefits or who meet various ‘means’ testing are exempt from paying fees. This means that if the fees of most claimants receiving Jobseekers Allowance are waived, the objective for the reforms to cut the number of claims could fall at the first hurdle, as by definition claims are brought by people who have just resigned or been dismissed. It is interesting that the government has not taken the step of requiring employees who have had fees waived of having to pay back the fee from any settlement or award of compensation – which ultimately would have been from the employer’s pocket.

Employment tribunals rarely award costs against a losing party. When this does happen the reforms will have an impact. Not only have employment tribunals recently been given the power to award up to £20,000 in costs (previously £10,000), but they can now order unlimited costs and assess such costs themselves where one party conducts a case in an ‘unreasonable’ manner (a hopeless case) which could now prove very expensive.

The judges also have greater flexibility to issue deposit orders of up to £1,000 where a specific allegation or claim has little prospect of success. Therefore a case which has seven weak allegations could lead to a deposit of up to £7,000 being required.

Additional reforms include bringing a cap of 52 weeks’ pay on unfair dismissal compensatory awards or £74,200 – whichever is the lower. For example, an employee earning an annual salary of £40,000 might have had the chance of being awarded £74,200 if the employment tribunal had found that he had substantial loss of earnings or pension for a period of two years. Now such an employee cannot receive more than £40,000.

A change designed to protect employers enables them to hold “pre-termination” discussions with employees in the knowledge that staff cannot use these talks as grounds for constructive dismissal unless an employer is found to have acted ‘improperly’. ACAS has also produced a code of practice on such discussions.

With a key aim of the reforms to deter vexatious claims from employees – and with 186,300 tribunal claims registered across 2011/2012 – there will undoubtedly be much interest in how strong a deterrent the fee introduction will prove going forward.

Given the relatively low value of the fees being proposed – and the possibility of avoiding a fee altogether – employers will understandably be sceptical.

Furthermore, employers know all too well from the now repealed statutory dispute resolution procedures that such changes can bring costly, time consuming satellite litigation where one case can spark a series of legal disputes.

It therefore remains to be seen whether the reforms will be another false dawn.