The government faces a £32 million bill after the Supreme Court ruled that fees for those bringing employment tribunal claims were unlawful. Catherine Baksi reports
Fees of between £390 and £1,200 were introduced by the then Lord Chancellor, Chris Grayling, in 2003 which government figures showed lead to a 79% fall in the number of cases.
Prior to that, claimants could bring cases without charge. The government justified the fees stating they were intended to transfer part of the cost burden of the tribunals from taxpayers to users of their services, to deter unmeritorious claims, and to encourage earlier settlement of disputes.
But the trade union UNISON, which brought the case, argued that the introduction of the fees was not a lawful exercise of the Lord Chancellor’s statutory powers, because they interfered unjustifiably with the right of access to justice under the common law and EU law, frustrated the operation of Parliamentary legislation granting employment rights, and discriminated unlawfully against women and other protected groups.
In a unanimous ruling seven justices in R (on the application of UNISON) (Appellant) v Lord Chancellor (Respondent)  UKSC 51, agreed with the union, overturning the previous decisions of the High Court and Court of Appeal.
The Ministry of Justice said it would take immediate steps to stop charging employment tribunal fees and put in place arrangements to refund those who have paid them. It has been reported that the Government will have to refund up to £32 million paid out in fees.
Giving judgment Lord Reed said the order introducing the fees was ‘unlawful’ under both domestic and EU law because it ‘has the effect of preventing access to justice’ and must be quashed.
He said: ‘The constitutional right of access to the courts is inherent in the rule of law: it is needed to ensure that the laws created by Parliament and the courts are applied and enforced. Tribunals are more than merely the providers of a service which is only of value to those who bring claims before them.’
The fees for small claims, he said, bore no direct relation to the amount sought and acted as deterrent to claims for modest amounts or non-monetary remedies, shown by the ‘dramatic and persistent fall’ in the number of claims brought.
He said: ‘Fees must be affordable not in a theoretical sense, but in the sense that they can reasonably be afforded. Where households on low to middle incomes can only afford fees by forgoing an acceptable standard of living, the fees cannot be regarded as affordable. Even where fees are affordable, they prevent access to justice where they render it futile or irrational to bring a claim, for example where in claims for modest or no financial awards no sensible claimant will bring a claim unless he can be virtually certain he will succeed, that the award will include recovery of fees, and that the award will be satisfied in full.’
While the court said that the government’s objective to transfer some of the cost away from the taxpayer, had ‘to some extent’ been achieved, Lord Reed said it did ‘not follow that fees which intruded to a lesser extent upon the right of access to justice would have been any less effective’.
He said: ‘It is elementary economics, and plain common sense, that the revenue derived from the supply of services is not maximised by maximising the price. In order to obtain the maximum revenue, it is necessary to identify the optimal price, which depends on the price elasticity of demand. In the present case, it is clear that the fees were not set at the optimal price: the price elasticity of demand was greatly underestimated.’
He added: ‘It has not been shown that less onerous fees, or a more generous system of remission, would have been any less effective in meeting the objective of transferring the cost burden to users.’ The court also ruled, that the fees were contrary to the Equality Act 2010 because they disproportionately affected women.
Justice Minister Dominic Raab, said: ‘In setting employment tribunal fees, the government has to consider access to justice, the costs of litigation, and how we fund the tribunals. The Supreme Court recognised the important role fees can play, but ruled that we have not struck the right balance in this case.’
He said the ministry will take ‘immediate steps’ to stop charging fees in employment tribunals and put in place arrangements to refund those who have paid, and that it would consider the judgment further in detail.
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