The Coalition Government proclaims that, in this time of economic crisis, we are “all in this together”. However, the Chancellor’s speech today at the Conservative Party Conference suggests that that is not, at least in the field of employment law and Employment Tribunals, the case. Let us pass over for now the fact that he is declaring new policy to his Party Conference, and not to Parliament, despite this being a regular complaint by the then Opposition against the Blair and Brown Governments. Let us look instead at the two main changes proposed.
Employers and Employment Tribunals
Employers hate employment tribunals. Whilst some companies might have insurance cover for such matters, or access to one of the organisations that provides assistance on these issues for payment of an annual fee (a bit like going to Green Flag or the AA for breakdown cover) many, particularly small businesses, are faced with a choice of acting for themselves, with the risks that can bring, or engaging a solicitor to represent them. The legal costs incurred by an employer can, especially if a full hearing proceeds over a number of days, run into thousands of pounds.
Whilst the Tribunal can award costs against a party where it is determined that they have acted unreasonably, this is much less of a risk for a claimant than the rule in court proceedings that the loser pays the costs. Often the claimant has no funds to meet a costs award anyway, even if one is made.
Employers view these cases as an interference with their right to run their business, large or small, as they see fit, and a needless drain on their time and resources.
Employees and Employment Tribunals
Employees are not very keen on them either, but find it necessary at times to have to go there. Employment Tribunals hear much more than simply unfair dismissal cases, although that is the most common type of claim presented.
Whilst there are a few high profile Employment Tribunal cases, where City financiers allege sex discrimination and seek million pound awards, the vast majority of claims relate to termination of employment, whether by dismissal or unfair selection for redundancy.
It is only the minority of cases which proceed to a full hearing. Often claimants give up as they cannot afford their own legal costs or they no longer have the stomach for the fight.
When it comes to legal costs the press coverage complains about the costs to business of defending these claims, whilst never looking at how the claims are funded by claimants.
As with employers, some employees have cover for a Tribunal claim, either through legal expenses insurance or through their membership of a Trades Union. However, in Scotland, most claimants do not have such cover, and proceed on their own, with the help of voluntary organisations like the Citizen’s Advice Bureaux or with a private solicitor or adviser.
Whilst there are solicitors and claims representatives willing to proceed on a “contingency fee” basis i.e. taking a fee only if the claim is successful, these are less useful in employment cases where there is normally no award of costs against the employer who loses the case – any payment to the solicitor, in a no win, no fee case has to come from the damages awarded.
In theory there is limited Legal Aid cover in Scotland for pursuing an Employment Tribunal claim, but this only kicks in where the case raises some issue of wider legal importance, and where the claimant meets strict financial limits.
Finally of course, employees are often reluctant to pursue a Tribunal case because of fear of what a new or prospective employer might think. “If he can take his last employer to a Tribunal, he could do the same to me” is a sentiment I have heard on a number of occasions from employers. In most cases the award due to a successful applicant would not make it worth their while to be out of work for a couple of years or more.
What Effect Does All This Have on Proceedings?
The result of these competing pressures on cost is that many cases settle by agreement before a full hearing takes place. An employer, even feeling that they have a strong defence, might make an offer to settle a case knowing that the claimant might have to accept the offer simply to meet their legal costs.
Equally, an employee with a strong claim may find themselves forced into settling a case (a) because unemployment means that funds are needed sooner rather than later and (b) the claimant does not want to risk their adviser ending up with most of their damages. So an early settlement, caused by these economic factors, is common, and, although on one view might not be seen as far, actually helps the system. On one cynical view, if the employer pays more than they want to pay, and employees receive less than they are looking for, then an appropriate balance has been struck.
In addition ACAS provides an excellent service in seeking to assist the parties, even where represented, to reach a settlement. Sadly ACAS has found itself ever more hard pressed by the increasing number of claims and by budget restrictions. The ACAS oil is now spread very thin.
Why Does The Chancellor Want to Change Things Now?
The CBI and other employers’ organisations have campaigned for many years to clamp down on the number of Employment Tribunal claims, for the reasons mentioned above.
It is a truism to say that the Conservative Party is more in tune with the employers than the Labour Party. The Government therefore has been looking for ways to reduce what are called the “vexatious” applications which are “hopeless” and exist only to trouble employers.
There has been a large increase in numbers of claims over recent years, although much of this has been caused by the growth of unemployment due to the recession. It is very easy, for example, to make a mess of a redundancy selection process, leaving the employer liable, but as long as they cannot show they have acted fairly.
What Are The Rules Mr Osborne Wants To Change?
Normally an employee will need to have had twelve months’ continuous employment with an employer to make an unfair dismissal claim, although if a dismissal falls into one of the “discrimination” categories, (of which there are many) then the minimum period does not apply.
Some years ago the time limit was reduced to one year as a result of a legal challenge on the grounds of sex discrimination. Because generally women had shorter periods of continuous employment than men, the former two year limit was deemed to be indirect discrimination against women – the rule affected far more women than men.
As matters stand today, there are no costs payable by a claimant when lodging an application with the Employment Tribunal and, unlike some Scottish court cases, no fees payable to the Tribunal as the claim proceeds. Some view this as encouraging frivolous claims, as if a “free bet” for the claimants.
So What Will Be New?
Mr Osborne now proposes that the time limit, except in discrimination cases, should go back to two years.
First of all, I wonder of a challenge might be brought to this on the basis that again there will be unfair and disproportionate discrimination against women.
Secondly, that should result in a fall in the number of cases as workers with between 12 and 24 months employment fall out of eligibility to claim. There has already been comment that in fact claimants will circumvent this by claiming “discrimination” but Employment Judges are very good at clarifying the position as regards precisely in what way discrimination is alleged, and if the Tribunal determines that there has been no discrimination, then the case can fall foul of the time limit. It is not enough to cry “discrimination” – it actually needs to be there.
Of course, there might simply be an increase in preliminary hearings designed to ascertain if there was discrimination or not, and that will mitigate the effect of the change, and in fact might make things worse as, even with fewer cases, there might have to be more hearings.
The other change and the one which has the potential to be most damaging to a prospective claimant, is the imposition of fees on claimants. The Guardian reports that:-
“Under the plans, applicants will be obliged to pay the costs of an unfair dismissal claim – £250 for lodging a claim and a further £1,000 if the case goes to a hearing – which will only be refunded if the employee wins.”
This is a remarkable change, and one expressly designed to price people who may have been sacked unfairly out of vindicating their rights. At the present time, in particular, a person dismissed from work might not find it easy to get back into employment and will find their funds very precious indeed. In such a case how is a sacked employee to be able to find the cash to pursue a case to the end? Employers might fell happy to sit tight until, depending on the stage it has to be paid, the claimant has actually stumped up the hearing fee.
I do not see the Scottish Legal Aid Board agreeing to fund new outlays which did not exist before, especially in a class of case they have little to do with just now.
It is possible that the same exemption from paying court costs which applies in Scottish court cases just now might simply be extended. The above exemption allows people in receipt of certain Income Based benefits to be exempt from paying the court fees, for as long as they remain eligible, not for the duration of the case.
But as the Employment Tribunals have a UK wide jurisdiction, I imagine the intention will be to have the same system across the board, and in these straitened times, I can well see the exemption being limited if not eliminated totally.
If I was a potential claimant, recently dismissed, struggling with the DWP to be paid the benefits to which I thought I was entitled, the prospect of having to pay over £1,000 to pursue a Tribunal case would be daunting in the extreme.
And the suggestion that the fees would be refundable if successful are unclear. Does this mean that the Tribunal has to find in the claimant’s favour? What if they win, but their award is reduced to “nil” under Polkey? What if a claimant wins on four grounds out of seven, or eight or nine?
Claimant’s advisers would obviously want to insist on employer’s refunding the cost as part of a settlement, but if they are not obliged to do so, will an employee be prepared to proceed to a Tribunal hearing simply to get their Tribunal payment back?
Expecting the Conservatives to extend the reach of the Employment Tribunals is unrealistic in the extreme.
However, what we have seen here is a blatantly political attack on the rights of the working person, at a time when they are at their most vulnerable.
One hopes that the lawyers who act for the main Trades Unions, for example, are poised to see the new Regulations, and mount whatever legal challenge they can.
In a week when the Home Secretary has already called for repeal of the Human Rights Act because it interferers with the work of her department and causes her “problems” we are going to be left again to look to the courts to protect the people. Let’s hope they find a way to do so!