If we needed any reminder of the importance of the UK’s Supreme Court, Wednesday’s decision that Employment Tribunal fees are unlawful should do the trick.
When the idea was first floated in 2012, the Institute of Directors (IoD) supported the introduction of fees, as nearly half our members reported being forced to settle cases that they were confident of winning because of the inordinate costs and time involved in fighting them.
A survey conducted at the time showed that, of members who had had a tribunal claim against them, just nine per cent were won by the claimant. In most cases the employer won, while in 13 per cent the claim was withdrawn.
These figures lent further support to concerns that many complaints were without merit, but that very often employers would choose to settle rather than face the time, expense, and stress involved in defending themselves at tribunal.
This had given rise to a “pay-off culture”, with more than half of IoD members being advised by lawyers that, even though they had a good defence against an employee or ex-employee, it would be cheaper to settle.
Before fees, individuals faced little risk in threatening to bring claim that was not merited. If it went to tribunal, even the weakest or most vexatious cases meant sizeable legal expense and wasted valuable management time for companies.
Businesses are loath to admit publicly when they have opted to pay someone off, but I have spoken this week to a former partner at a professional services firm who admitted they would settle five out of every six cases that they knew had no merit.
The government at the time recognised this very real problem and brought in the fees to redress that balance. Introducing fees was never intended as an obstruction of justice. Rather, they were meant to be a way of helping to deter claimants from opportunistically using the threat of a tribunal to force a settlement.
There were problems with the fees, and there may have been ways of improving the system by lowering some of the charges or increasing remittances, as suggested last year by the House of Commons Justice Committee, but the prospect of a return to the days of no fees will be a frightening prospect for employers.
The IoD supports the enforcement of employment rights. If done correctly, workers get a fair deal and employers get a level playing field with other law-abiding businesses. In this case, the Supreme Court has decided that the Employment Tribunal fees system was a barrier to justice. The same thing could, however, be said for businesses which, with a potential increase in vexatious cases, could now be held to ransom by unfair and unjustified claimants.
The judgement could open the door to a spike in vexatious claims, particularly as the government has since imposed crude and potentially misleading gender pay reporting requirements, and an immigration skills charge that makes it more expensive to employ non-EU citizens.
Companies with a gender pay gap will be exposed to claims of paying women less than men for the same jobs, even though the problem mainly comes from firms not doing enough to build a pipeline to get women to senior positions, skewing the average. Where there is genuine discrimination, the tribunal system was always there, subject to paying a fee.
The skills charge is even more worrying, as the government’s unstated intention is to make companies choose UK workers over non-EU workers – something which would be discriminatory. If a non-EU applicant fails to get a promotion or contract extension, it will be more tempting after the abolition of fees to claim the reason was the skills charge.
This is worrying at a time when businesses already face extra costs through the apprenticeship levy, national living wage, and pensions auto-enrolment. The government must now urgently look at other ways of ensuring there is no revival in the pay-off culture.