Monday, 16 July 2012

Fire at will

The government has now unveiled its proposals for fees in the Employment Tribunals, to be charged with effect from the second half of 2013.

It's an understandable, and on the face of it right, move to reduce the cost to the taxpayer of the tribunal service in two ways.

First, fees received will help to defray the cost of providing the service. Secondly, and more important, those fees will act as a deterrent to claims so that tribunals 'are used as the option of last resort to resolve employment disputes'.

There will be different levels of fees but those of greatest interest will apply to unfair dismissal, discrimination and similar claims. The government proposes a charge at issue of £250 and a hearing fee of £950, so total of £1200 in all cases.

So what is the likely impact of that? Let's take an example.

Someone in their late-20s with a salary of a little under £20,000 per annum is quite likely to be taking home somewhere in the region of £1200 per month after deductions. They may have worked for a little over five years before they are dismissed- they say, unfairly.

If successful in a claim, they can expect to recover approximately £2500 for basic award and loss of employment protection. Three months loss of net earnings on top of that would be unremarkable giving such a claim a total value in round figures of £6000.

Regardless of worth, many unfair dismissal claims can be of sufficient complexity, certainly to the employee in the street, to demand the assistance of a lawyer and outrageous though it may seem to some, lawyers also need to be paid.

It is reasonable to suppose that the jobless client will only want to instruct a representative who is prepared to work on speculative terms. Under the present regulations that apply to contingency fee arrangements, or damages based agreements, the maximum that can be charged for fees and VAT is set at 35% of compensation. One presumes that the fees payable to the tribunal fall to be classed as disbursements which fall outside the cap.

In my example a little over £2000 could be charged, inclusive of VAT, for the lawyer's costs. The "successful" claimant would also pay their tribunal fees of £1200 out of the balance. After discharge of one or two further reasonable expenses, they might be left with a net result of just over two months net pay.

The question for them at the outset is whether they want to gamble a month’s income (at a time when they have no income) on the prospect of recovering two months' worth. It's hardly an attractive proposition, before one begins to consider the emotional cost and investment of time required to run such a claim even with professional assistance.

And how does it look for the lawyer?

In this example, he or she may reach the happy point of being able to invoice £1750 plus VAT. All of that will have been at risk of the claim failing completely, of success on liability but a reduced award and in all cases inability to recover the compensation awarded from the respondent.

How much work will the lawyer have done? There’s no tariff here where the work necessary to take a claim to a successful outcome varies and may require the skills of representatives with different levels of experience and charge.

There are employment law “consultants”, operating nationally, who market themselves on the strength of their ability to provide a high standard of representation at comparatively low hourly rates of around £130. Not having to pay for practising certificates, compensation fund contributions or for professional indemnity insurance helps, of course.

In my example, if these providers were to generate a reasonable return, they would need to run the entire case within a maximum of around 13 hours.

Assume the hearing takes a day (and many are longer) - that means six hours in tribunal. Travel on the day may occupy another two hours, often more.

Only five hours are left to take initial instructions, evaluate the case, advise, draft the ET1, deal with disclosure of documents, draft witness statements, deal with and attend any interim hearings, correspond with claimant, tribunal and opposition throughout the case and prepare for the hearing.

By and large, it just can't be done - not by them or by solicitors charging maybe half as much again. We don't even get to the question of winners paying for losers - an essential feature of speculative fee-based litigation.

The key ingredients that is missing here is, quite simply, costs shifting. Loser pays.

I'm one of many who believe that's a noble and just proposition. It seems that our government doesn't. The concept is under constant attack within our civil justice system, mainly at the behest of large insurers, and consistent with that there remains steadfast resistance to a costs shifting regime within employment tribunals.

The consultation document reminds us that costs may be awarded where a party has conducted their case unreasonably. Contrary to the belief of many, including employment law practitioners, tribunals do make awards of costs (I secured my fourth last month) but they are rare. The consultation document tells us that such awards are made in only 1% of cases.

Within the present proposals is the suggestion that tribunals will have a discretion to direct that the fees of a successful claimant should be paid by the respondent. There is no mention of the wider term "costs" and there is emphasis on the discretion in relation to fees.

Experience suggests that the combined outcome will be that whilst the recovery of the fees paid, even by a successful claimant, is far from certain the existence of a discretion to make that much of an award will render unreasonable conduct costs orders even rarer than they are now.

As with the proposed increase in the small claims track limit for personal injury cases and Sir Rupert Jackson's take on proportionality[1] the result is a significant barrier to claims, regardless of the merits. The rewards for the lawyers who might take the risk of not being paid, let alone the funding of disbursements for their unemployed client, is too uncertain and too small to sustain a business model based on conditional or contingency fees.

For the successful claimant, the outcomes even after inadequate remuneration of their champions may not justify the financial risk and general heartache of pursuing their rightful entitlement to a significant sum of money and repairing a piece of their life.

The government points to the need to resolve disputes by other means. This translates to the expectation that within the short period of time (3 months) limited for commencement of an unfair dismissal claim, claimants will persuade the employer who sacked them illegally to mediate and to offer an acceptable alternative to litigation[2].

Let's not think for the moment about how that alternative might be facilitated.[3] Instead just consider the likelihood that the employer who has had the courage to unfairly dismiss is likely to volunteer payment of a number of thousands of pounds in the face of a risk that otherwise they may have to pay, er, nothing in the way of a penalty for fighting the claim against a financially and emotionally weak opponent.

It simply won't happen and so this is, again, a denial of justice to all but those whose pockets are deep.

From a broader perspective, the effect is to ditch any incentive to resolve disputes with integrity, in a manner consistent with principles of natural justice and in particular the requirement to listen to the other side.

We’re back to the conclusion that what matters more to the MoJ and this government, in the name of economy, is the stifling of claims and the silencing of complainants[4]. The truths and values for which this country has been admired and followed globally are to be further eroded.

[1] See Solicitors Journal 10 July 2012
[2] See
[3] See
[4] See

Tuesday, 3 July 2012

Panel games

We needed to send a written reply, this morning, to one of the offices of a leading national law firm.

We looked for an e-mail address but there was none on the letter we received – by post, inevitably, in the case of this particular firm.

Curious thing is, there is no postal address either.

And no fax number.

Plainly these guys think that the rest of the world should take the trouble of finding their contact details.

Actually, there was one potentially helpful piece of information at the end of the letter - a direct dial number, with the name of the correspondent.  We gave him a call.

Voicemail message informed us that he is on holiday...until 26 June. Yes, that’s a week ago.

So, this is how things should be done?

Some of the less co-operative legal expenses insurers (BTE) will tell you that one of the reasons for refusing to instruct anybody but their “panel lawyers” is that these are approved and audited legal suppliers delivering a superior service.