Claims likely to rise following the abolition of employment tribunal fees

The abolition of Employment Tribunal Fees following UNISON’s successful Supreme Court appeal swept away a significant affordability barrier to individuals bringing claims against their employers or ex-employers.

There has been happy anticipation in the legal press that a surge of cases would emerge as access to justice was restored. Employment lawyers have fondly reminisced about a time before fees when individuals could more easily afford to bring claims. Commentators have speculated about the impact that the outcome of the UNISON case might have on the volume of future employment tribunal claims.  Will claims volumes increase to 2013 levels?

Rates have remained steady since ARAG entered the UK market in 2006 despite legal costs inflation. We should explain that over the last four years, any cost savings that it may have been assumed would have resulted from fewer employment tribunal applications have been tempered by:

·         a deflection of costs from tribunal representation to ACAS early conciliation. Early conciliation has been a significant factor in encouraging parties to settle disputes and reducing applications to tribunal. We cover legal costs to represent businesses throughout early conciliation. More than 92,000 complaints were notified for early conciliation in 2015/16 and in 48% of cases tribunal applications were avoided;

·         payment of employment tribunal fees either as part of an agreed settlement or as a consequence of losing a claim at tribunal; the Government’s undertaking to repay fees does not extend to employers (or their insurers) who were liable to pay them;

·         the effect of inflationary influences which have not been passed on to customers over time.    

Anecdotally, tribunals have reported an increase in the number of applications being received. We are hearing of long waits for hearings to be listed as applications back-up. The Employment Tribunals National User Group (England & Wales) noted, at its October 2017 meeting, that Regions were reporting a doubling in new claims since the UNISON decision. http://bit.ly/2D6RACE

Significant court closures, mergers and relocations and a shortage of employment tribunal judges, have contributed to the pressure felt by some tribunal centres. Additionally, the judgment in a particular case means that single claims may be brought where a multiple claim may have previously been brought; however the Government’s July to September 2017 tribunal statistics (published in December 2017) showed that single claim Employment Tribunal receipts are up by 64% over the previous quarter. http://bit.ly/2BoN01T This represents a sharp and immediate increase in risk for legal expenses insurers.

We are not going to mirror such an increase by raising premiums by the same extent (64%) or anything close to that; however, we will continue to monitor official tribunal statistics and our own claim volumes. Our Underwriting Team will carefully consider claims experience in light of previous employment claims and forecast the likely increase in claims to determine the future premium required.

3 legal developments that probably won’t happen in 2018

There’s any number of articles around at this time of year telling us about legal developments that are coming up in the next 6 to 12 months.

From the annual increases to tax allowances, minimum wage rates, and statutory pay for sickness, maternity and other family-related absence, to much more fundamental changes such as the new gender pay gap reporting requirements to the much heralded General Data Protection Rules (GDPR) there is a lot that UK businesses need to prepare themselves for, by springtime.

But, looking further into 2018, there is also plenty of legislation that has been proposed but is still a long way from the statute books, let alone an implementation date.

The combination of the government’s surprisingly weakened position in the House of Commons since last June’s election and the inevitable priority that must be given to the legislation necessary to deliver an orderly exit from the European Union, has greatly reduced the political capital and parliamentary time available to other legislation.

The free vote that the Prime Minister had promised on repealing the 2004 Hunting Act was an early casualty in 2018, but there are a few other initiatives unlikely to get before parliament, onto the statute books and into force by the end of the year.

Tribunal fees strike back?

As recently as October, (then) Lord Chancellor David Liddington claimed the government still wanted to replace the employment tribunal fee regime struck down by the Supreme Court last summer. However, higher priorities for the Ministry of Justice and the reduced income that any fair and workable system could raise, will make quick progress on this unlikely.

LASPOA reform

Formal assessment of the impact that five years of the Legal Aid, Sentencing and Punishment of Offenders Act (2012) has had on access to justice, was finally timetabled by David Liddington last year, and is due to report by the end of April. Given the time it has taken even to get the assessment underway, the prospect of any major reform of the legislation being implemented in 2018 seems remote.

Civil Liability Act

Another piece of MoJ business that we seem to have been talking about forever, is the Civil Liability Bill mentioned in last year’s Queen’s Speech. The proposed increases to small claims court limits of £5,000 for road traffic injury claims and £2,000 for other injuries appear to be set in stone, but the faltering progress these reforms have seen since George Osborne first announced them in 2015, makes a September implementation seem less likely than April 2019.

Unlikely as these three developments may be to see legislative action this year, there is more than enough reform taking place in 2018 to keep us all busy. The uncertainty surrounding the implications of Brexit, especially what it means for employment law, should become clearer as the year progresses. But one piece of EU reform that seems certain to survive, GDPR, should be enough to keep us all busy, at least until the summer.

Sometimes doing the “right” thing leads to unforeseen consequences

A couple of “issues” have passed my desk recently which leave me with a smarting sense of injustice.

Take Insurance Product Information Documents (IPID)…

My own opinion is that IPIDs are inferior to Key Facts documents in the UK because consumers will receive less information about their insurance product than they previously would have been given.

For example, where products are created by a managing general agent, there is no requirement to show the insurer. More generally, IPIDs do not include information about making a complaint and do not allow exclusions that apply to a particular insured event to be lined up against the description of that insured event. Additionally, there is no space to highlight extra services which complement “what is insured” – such as telephone helplines and in-line legal documents which significantly enhance the value of products for consumers.

We have taken a very flexible approach to product development and have delighted in designing unique features that respond to the needs of specific target customers and give niche cover. As a consequence of our willingness to go the extra mile, ARAG IPIDs will need to reflect the many modifications that we have made. Our innovation has been wide-spread and we have hundreds of “non-standard” wordings to consider. Had we adopted a more intransigent approach and not deviated from our standard product specifications, delivering to the exceptionally tight deadline would have been very much easier.

We also have many “embedded” policies where we have integrated ARAG products into primary insurance products. The “primary insurer” is deemed to be the product manufacturer under these circumstances. We will liaise on an individual basis to supply content for their IPID in relation to the ARAG cover that has been embedded.

We continue to hope that the FCA will agree to a transitional introductory period which will allow us to fully review all of our offerings and create suitable IPIDs for all of those special profile customers. In the meantime, we will be contacting our agents to supply suitable IPIDs very soon.

And what about employment tribunal fee refunds?

While the abolition of unfair employment tribunal fees is a splendidly good thing, it was very disappointing to read that where settlements have been reached between the parties in dispute -with fees being included within the settlement figure, the employer will be unable to apply for a rebate. The employee, who would have paid the fee the first place (but recovered it as part of their settlement), can apply for the refund and will stand to benefit from a “windfall”.  It seems that employers who have “done the right thing” by settling the dispute are being penalised, while those who may have proceeded to tribunal, lost and received an order to pay will be able to obtain a refund.

This seems very unfair as escalating disputes to tribunal is surely a last resort. It is in the best interests of parties to arrive at an amicable settlement.

So, doing the “right” thing sometimes causes detriment however, we will always put our customers first. We remain committed to building products that work well and to raising customer awareness of the benefits they can access when they buy legal expenses cover.   

Employment Tribunal fees will be scrapped

UNISON have won their Supreme Court challenge against the imposition of Employment Tribunal Fees. The Supreme Court website is about a week out of date and at the time of writing the full judgment is not listed however UNISON has issued a press release.

The introduction of fees, four years ago, is one factor that has contributed to rising claims costs for legal expenses insurers; however the potential costs savings to be realised following the scrapping of fees will be tempered by a potential increase in the volume of claims. UNISON’s victory will not be welcomed by businesses whose vulnerability to be claimed against will return.

We don’t yet know whether fees will be refunded automatically or whether, in the future, it will be possible to charge a lower fee.

UNISON makes a valid point when it says, “We’ll never know how many people missed out because they couldn’t afford the expense of fees. But at last this tax on justice has been lifted.”

ARAG policyholders will not be in the unknown pool of individuals who were deterred from pursing their employment dispute as their decision to take out Family Legal Solutions has given them protection against the unfair fees. Business policyholders who settle fees or are ordered to pay them have also been covered.     

ACAS’s 2016-17 report shows that around 1800 requests for early conciliation are received each week on average. Just below 50% of cases settle through ACAS early mediation and avoid being escalated to a hearing. ARAG policyholders have the reassurance of legal representation throughout early conciliation and beyond.

In relation to employment disputes, the fees have enabled the Government to save around one-third of the costs needed to run employment tribunals. Since introducing fees for employment claims other tribunal jurisdictions have introduced a fee system. For example, low fees of £100 for an application/ £200 for a hearing are payable for claimants seeking dispute resolution through the Property Chamber of the First Tier Tribunal. This level of fee seems much fairer and it’s possible the employment tribunals could adopt something similar.

Aside from charging fees in tribunals, did you know that last year HM Courts & Tribunal Services turned a profit of £100m through the imposition of “enhanced court fees”?  Enhanced court fees apply where court fees are set at a level that exceeds the state’s cost of running a case. This in effect turns courts into profit centres.  We deal with a number of landlord repossession claims and the last hike in fees increased court fees for landlords by 20%.  As tribunal fees have been judged to be unfair surely these enhanced fees are also unfair? 

ARAG’s vision is that all citizens should be able to afford to assert their legal rights and we exist to protect consumers, landlords and businesses against incurring heavy expenses to make or defend a claim. While the abolition of employment tribunal fees is welcome news for employees we will keep a close eye on the impact the decision might have on our business policyholders and we remain concerned at the high cost of bringing other types of claim. 

Is access to justice really out of reach for most employees?

The Guardian’s article “Access to justice is no longer a worker’s right but a luxury” provides an illustration of the difficulties faced by one individual who faced discrimination at work.

https://www.theguardian.com/commentisfree/2017/mar/28/employment-tribunals-workers-rights

On the face of it the lady concerned did not appear to be very well off but she was unable to obtain help with employment tribunal fees and in the event relied on her trade union together with crowd-funding to cover her legal costs and the tribunal fees.  Her case was settled and she was spared attending a hearing. 

We have blogged about the introduction of employment tribunal fees from time to time and this story serves as a reminder of the need for legal protection for individuals. BTE is more valuable than ever since the introduction of fees.

Following its review of employment tribunal fees the Government has confirmed that they have no intention of reducing the level of fees payable (£1200 for most claims that result in a hearing).

The story, however, does not paint the full picture.  It gives the impression that employment tribunal cases are scarce as fees deter individuals from pursuing their rights. While it’s true that claims against businesses have dropped since the introduction of fees the latest quarterly statistics – Q4 2016, show a 3% increase in the number of single tribunal applications received over the same quarter in 2015.

More importantly around 92,000 notifications of disputes were received by ACAS’s early resolution service in the year to March 2016.  The early conciliation service is free to both employers and employees and ARAG provides legal representation throughout the process for our commercial and family policyholders.  Parties are successful in arriving at an agreement through ACAS Early Conciliation in around one-third of cases and can avoid their claim escalating to tribunal.