UK Employment Law Coffee Break: Tribunal fees, a focus on UK and US employment law, and our January HR pensions spotlight

Fees in Employment Tribunals and Employment Appeal Tribunals: new government consultation published

The government has this week published a consultation setting out its proposal to introduce "modest fees" to the Employment Tribunal (ET) and Employment Appeal Tribunal (EAT). Stated aims are to ensure users are paying towards the running costs of the tribunals and to ensure cross-jurisdictional consistency by putting users "on broadly the same footing" as users of other courts and tribunals. No fee is currently payable to bring an ET claim or appeal to the EAT; while a previous fee scheme did run between 2013 and 2017, the scheme was ruled unlawful by the Supreme Court for a number of reasons, including that the level of fees imposed failed to provide access to justice.

Three key principles underpin the current proposal – "affordability", whereby a fee is set at a level that individuals can reasonably be expected to be able to meet; "proportionality", whereby the cost of the fee should be proportionate to the remedy being sought, to avoid making the pursuit of a claim irrational and futile; and "simplicity", in that fees should help contribute towards the tribunals' running costs, while ensuring users can make informed decisions based on a clear and transparent fee system.

The consultation proposes a single fee to issue a claim in the ET of £55 (applicable to all claims with limited exceptions) and, likewise, an appeal fee of £55 in the EAT. In the ET, unlike the previous regime, there is no proposal to charge different claims at different rates depending on whether it is classed as a simple or more complex claim, or for a second fee to become due at the hearing stage.

However, where a claim is brought by multiple claimants, the consultation proposes that the claimant will be treated as a single entity and just one fee of £55 will be payable with the consultation stating that this could be "divided among all the claimants involved, as agreed between them". In the EAT, £55 will be payable per judgment, decision, direction or order of an ET being appealed – so if a notice of appeal includes appeals against two ET decisions, the total fee payable would be £110.  

Reflecting on the previous Supreme Court decision regarding the old regime, the government states that in its current proposals it "has endeavoured to ensure that the fees proposed… are proportionate and affordable", and as with other court and tribunal jurisdictions, those who cannot afford to pay will be supported by the fee remission scheme. There is no proposal to change the general rule in the employment tribunals that each party has to pay their own legal costs (including any tribunal fees) irrespective of who wins the case.

Given the significant difference in the fees now proposed and those implemented between 2013 and 2017 (which depending on the type of claim could run to £390 or £1200 in the ET or £1600 in the EAT), it seems unlikely that a reintroduction of fees will see the substantial fall in claims that accompanied the previous scheme. While the proposal seeks to ensure user-contribution towards the tribunals, the estimated contribution from the current fee proposals of £1.3 to 1.7m from 2025/26 onwards is unlikely to make a significant impact on the stated £80m cost in running the tribunals during 2022/23.

The government states though that the "modest fees may incentivise parties to settle their disputes early through Acas" noting that "better engagement by parties in Acas early conciliation would not only add value for taxpayer money that is spent on providing this free service, it could also help alleviate some of the pressures the ET are currently facing".

It is always good practice for employers, when on the receiving end of a claim, to take a step back and reflect on what outcome the business would like to see. Employers should consider issues such as the prospects of success, financial and reputational exposure, and internal and legal costs – and devise a strategy accordingly. Where early settlement is considered to be a viable option (this can be difficult if a claimant takes an entrenched position to litigate) it will be interesting to see whether or not any reintroduction of fees does have any impact in this respect.   

Employment law across the pond: introduction to US and UK employment law

Webinar hosted by Lowenstein Sadler
Tuesday 13 February 2024 (14:00-15:00 GMT)

For UK employers thinking of hiring in the US, and vice versa, this webinar will summarise the similarities and differences in US and UK employment law. Speakers, including Julie Levinson Werner (Parter, Lowenstein Sadler) and David Cubitt (Partner, Osborne Clarke), will discuss all aspects of the employment relationship, from hiring and firing and everything in between for UK and US employers.

Topics will include:

• employment agreements
• employment at-will
• benefits
• non-competes and other restrictive covenants
• compensation
• discrimination
• termination of employment

We look forward to you joining us. Please sign up here.

Cost of living: should employers do more for their pensioners?

Final salary pensions are costly to employers and generous to pensioners, or so goes the general view, but how do pensions keep their value once in payment?

Typically, the answer depends on pensions legislation, the pension scheme's rules and when the pension was earned. 

For pension earned on or after 6 April 1997, pensions legislation sets a minimum annual increase rate of inflation (the increase in the consumer prices index) capped at 5% for pension earned between 6 April 1997 and 5 April 2005, and capped at 2.5% for pension earned after 5 April 2005.  

For pension earned before 6 April 1997, there is a legal minimum rate of increase for guaranteed minimum pension (GMP) earned by members who were in contracted-out employment between 6 April 1988 and 5 April 1997. Beyond this there is no legal requirement to increase pre-April 1997 pension once it has come into payment. 

The pension scheme rules might reflect the statutory minimums, or they might be more generous. They might also give the employer and or the trustees the power to pay an increase on pre-1997 pension (or a more generous increase on any pension), exercisable at their discretion.

This means that every pension scheme is likely to have different groups of pensioners entitled to different rates of increase. Pensioners who are mainly reliant on GMP or pension earned after 5 April 1997 have some inflation protection but, as recent press reports indicate, some are unhappy with the caps applied by the legislation and are lobbying both government and scheme employers and trustees for higher increases. Pensioners who earned a material proportion of their pension before 6 April 1997 may be wholly or largely reliant on the discretion of their scheme employers and/or trustees for any increase at all.  

Whether employers and or trustees should exercise a discretion in the scheme rules to (for example) pay an increase on pre-1997 pension will depend on the wording of the relevant rules and the circumstances of the case, including factors such as the funding position of the scheme and any past practice of awarding discretionary increases. What is clear is that trustees and employers should not ignore a discretion to increase pre-1997 pension simply on the basis that legislation does not require them to award an increase. If there is power in the scheme rules to increase pensions, particularly where this power is coupled with a duty to review pensions annually, trustees and employers should follow an appropriate review and decision-making process. 

Recent press reports suggest that some pensions earned before 6 April 1997 have lost over half their value since the members' retirements and that these pensioners are feeling the pinch more than ever. If the scheme is well-funded or the employer can afford it, should a power to pay increases be exercised? Also, as more schemes move towards wind-up, if the trustees and employers are considering insuring the scheme's benefits, should they insure a pension increase for these members? Pensioners may argue that any discretions in the rules were included for a reason – to help pensions keep their value where funding allowed – and further case law to explore these issues seems likely.

If you have any questions please do contact your usual Osborne Clarke contact or pensions partner, Claire Rankin.