Working Theory

by Michael Reed

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I do employment law for the Free Representation Unit.

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michael at workingtheory.co.uk

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Some predictions on fees

30 July 2013

Employment tribunals started charging fees from Monday.

I have a few predictions, which I’m writing down now so that we can check whether I’m right in a year or so.

The number of claims will significantly reduce

This is an easy one. If it costs money to bring a claim, fewer people will do it.

It’s difficult to just how significant the impact will be. But I’d guess between a 20% and 30% reduction.

There will be little impact on the merit of the cases brought

Vexatious litigants will be unaffected by fees. Fees discourage claims, because, in general, people are rational actors. They factor the downside of paying the fee into their decision, and then fewer decide to bring claims.

Vexatious litigants, by definition, are not rational.

The vast majority of weak claims, however, are not brought by vexatious litigants. They’re brought by litigants who don’t accurately assess the strength of their case. So they think they have a good case, when they don’t.

Assessing the strength of your case, without legal advice, is hard. It’s hard to be objective about your own claim. And most employees don’t know a lot about employment law. But finding decent advice is difficult, and will get harder rather than easier over the next few years as the reductions in legal aid and other funding bite.

This means that whether people bring claims often has less to do with the strength of their claim and more to do with their determination. So fees will discourage the less determined, but these won’t necessarly be those with weaker cases.1

There will be a higher percentage of cases reaching hearing

First, the fees will have cut out those claimants who are not fairly determined to pursue their case. Second, the structure of the fees and the reality of human nature will push people away from settlement.

There will be a strong temptation on the part of employers not to consider settlement until they’ve seen that the claimant will pay the fee. They will hope that, if they don’t, the case will go away Some employers will resist this temptation, but many won’t.2

But once the employee has paid substantial fees they are locked in by their sunk costs. They can’t withdraw without losing the money – or getting it back as part of the settlement. The vast majority of employment claims are fairly low value – the medium unfair dismissal award is £4,560.3 At this point, trying to recover £1,200 of fees will scupper a lot of negotiations.

Since cases will be harder to settle, which will mean a higher percentage will go to hearing. My guess is that this will mean the number of cases reaching hearing will drop slightly, because of the significant reduction in claims being lodged, but only slightly.

There will be administrative problems, especially with remission

The system is going to have to deal with a lot of fees administration, particularly in relation to remission, which it hasn’t had to do before. I think this is going to end badly. The combination of government IT, forthcoming changes to the remission system and the simple difficulty of assessing tens of thousands of people’s finances seems horribly likely to end in chaos. I really hope I’m wrong about this, but I think delays, confusions and mistake are more likely than not.

  1. There is some correlation, because people who are treated badly are both more likely to be determined and more likely to have strong cases. But this correlation is moderate, not strong. It’s quite possible to have been treated abominably, but have a weak case. Equally, some people who are treated very badly are not determined to bring a case, either because they’ve just not inclined to litigate or because they’ve been disturbed by the events.

  2. If I was advising employers I’d urge them them to resist. Partly because I think it’ll be much harder to settle the case once the fee is paid. But also because the real damage from employment litigation to employers is that it’s happening at all – which means time and money being spent on it and significant stress being put on people because of it. Waiting for the hearing fee to be paid before considering settlement make much of this damage inevitable.

  3. Employment Tribunal and Employment Appeal Tribunal statistics (GB) 2012

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