27 March 2020 - Article
Today sees reforms come into effect in relation to tribunal fees and compensation limits for unfair dismissal. Whilst there are no surprises in terms of the content, the implementation dates have been announced only recently.
For dismissals which occur on or after 30 July there will be a significant change to the cap imposed on compensation for unfair dismissal. 29 July will see the introduction for the first time of a fee for bringing a claim to an employment tribunal.
Unfair dismissal cap reduced
The Government first suggested in September 2012 that it was proposing to reduce the cap on the compensation that can be awarded in an unfair dismissal claim. Having considered various options, it finally decided to limit annual compensation to the lesser of one year’s gross salary and the current upper limit of £74,200. The upper limit will continue to be reviewed each year in line with inflation, but the annual review date is changing from 1 February to 6 April.
The cap of one year’s salary is limited to 52 multiplied by basic salary and will not therefore include pension contributions, benefits in kind or discretionary bonuses. However these would continue to be taken into account if, for example, an employee claiming unfair dismissal had found another job relatively quickly after dismissal and the losses between the date of dismissal and the new job were being calculated – total loss in such a case is likely to be below the cap in any event.
Part of the stated object of the new law is to give employers more certainty about the level of award that might be made against them in an unfair dismissal claim. However here has been some speculation that employees may be more ready to bring discrimination and whistleblowing claims in order to circumvent the statutory cap. It remains to be seen whether that will be the case. The introduction of tribunal fees (see below) has the capacity to reduce the willingness of employees to seek redress for perceived unfairness or discriminatory conduct by their employers.
Employment tribunals are also introducing fees for the first time for cases commenced on or after 29 July 2013. In the majority of cases, claimants who are not eligible for fee remission (certain benefit claimants and those on low incomes) will have to pay a fee of £250 when starting a claim and a fee of £950 when the main hearing is listed. Claims will not be accepted unless they are accompanied by either the initial fee or an application for remission. Claims may also be struck out if the hearing fee is not paid on time. Additional and/or smaller fees may be payable in certain cases such as a claims for unpaid wages or holiday pay.
Employers who are unsuccessful in defending tribunal proceedings may be required to reimburse fees paid by a successful Claimant. Provision for this is made in new tribunal rules which are coming into effect on the same date. Employers will also need to pay fees for matters such as contract counterclaims (£160) and judicial mediation (£600). There will be additional fees for appeals to the Employment Appeal Tribunal against tribunal decisions, payable by the party who appeals.
The proposal to introduce fees has been controversial and has been challenged by way of judicial review both in Scotland and in England and Wales. The challenge will not stop the fee regime being implemented pending court hearings later in the year, but if the challenges are successful the regime may have to be amended or abolished. In the meantime it will be interesting to see how much impact the need to pay a fee when starting a claim will have on the willingness of employees to challenge unfair or discriminatory practices. The necessity to pay a fee prior to a full hearing may in some cases turn out to be an obstacle to early settlement discussions as some employers may wait to see whether the employee will be able to pay the hearing fee before putting forward an offer to settle.