The Today programme on Radio 4 ran a story this morning dealing with whether employment tribunals are used to extort settlements from employers. Adam Wagner has already posted a thoughtful response here. Some of the assumptions relied on in the programme were questionable. Having conducted some research in the area (see here, here and here), I share some of the important facts as I see them:
- Having interviewed solicitors specialising in employment cases, and looked at data from BIS’s survey of employment applications, it is clear that significantly more money is spent on defending employment claims than is spent on bringing them. Fewer employees are represented or have the benefit of meaningful advice. Unless it is significantly harder to defend than to bring employment claims, this suggests an inequality of arms against employees not in favour of them.
- A lot of emphasis was placed on the fact that, ordinarily, claimants would not be asked to pay their opponent’s costs and therefore employment tribunals are effectively riskless. This is true, but is only part of the picture. For employees to bring claims they either have to fund their own lawyer (payable win or lose) or someone else has to fund that case (either a trade union, an insurer or the lawyer him or herself by taking on the case on a no win no fee basis). There is risk on that case (about a quarter of cases are lost) and that risk is borne by the funder. This should, and probably does, inhibit the bringing of poor claims.
- A comparison was made between the absence of costs shifting in employment tribunals and the presence of costs shifting in litigation. Both positions are simplifications, but in fact the vast majority of employment tribunals are settled for less than £5,000 which would suggest these are cases akin to small claims where in general there is an absence of cost shifting.
- The idea that no win no fee agreements have lead to a significant increase in claims is flawed. The best estimate of the current level of contingency fees in employment tribunals is that they fund about 7 percent of claims.
- Similarly the idea that no win no fee claims lead to poorer claims is flawed: my research suggests claimants on no win no fee agreements get very similar results to those who bring cases under other fee arrangements.
- The assertion on the Today programme that claimants lose more cases than they win when they actually reach a final hearing also appears to be incorrect (see figure 9.1 here). In the 2008 survey more claimants won their cases than lost them (although in 2003 slightly more lost than won). To me the data suggests a reasonable balance between cases won and lost with defendants and claimants taking cases to tribunals with reasonable expectations (on both sides) that they are likely to prevail at a final hearing.
None of this data deals directly with the normative question whether employment tribunal claims contain too many poor quality claims but the fact that about 75%-80% of claims are settled, and the fact that both claimant and defendant stand a reasonable chance of winning their cases at a final hearing do not suggest a system that is not operating effectively in terms of the merits of the claim. It is possible that the settlement figure contains nuisance settlements of poor merits (but also that the cases dropped are sometimes based on flimsy defences – a problem that never gets mentioned in such debates). The only way to establish directly the extent of either problem would be to take a random sample of claims and review their merits independently. With decent cooperation from sufficient parties this is possible. If employers are genuinely concerned about the problem, they should fund this kind of research rather than relying on lobbying on a set of dubious premises.
A second issue is that this kind of complaint about employment tribunals indicates a broader failure. If tribunals were genuinely user friendly, then neither party would need to use lawyers: costs could diminish and the access to justice of both parties would be served. This suggests that reform should concentrate not on reform of costs rules but on simplification of substantive law and procedure as well as a radical focus on making the adjudicatory process lay- rather than lawyer friendly. Prohibition of legal representation might be contemplated or even Ombudsman, inquisitorial-style approaches which circumvent the need for representation (perhaps lawyers could be forbidden in lower value cases). This should also reduce cost significantly. Simplification, de-lawyering or the development of Ombudsman like approaches might be subject to the criticism that the employment disputes are not subject to the rigours of adversarial process or that justice is in other ways rougher. In other words, the criticism might be made that a less adversarial approach would lead to rougher justice. That may or may not be the case in the abstract but the reality is that most cases settle, employees and employers are inhibited from exercising adversarial rights by the legal costs they would need to incur. Similarly, the link between complexity of law and refinement of legal decision-making is a dubious one (see Wright and Ellinghaus’ is work referred to here). The argument might therefore be turned on its head: the realities of legal costs make adversarial justice rougher justice. Maybe it is time for a change?