Devolution of Scottish employment tribunals

On 1 September this year, as part 
of her ‘Programme for Scotland’ speech outlining proposed legislation in the Scottish parliament, the First Minister Nicola Sturgeon outlined a number of measures that the Scottish Government hopes will ‘place a strong – and growing – emphasis on fair work’. Principally among these was a commitment to abolish employment tribunal fees as soon as the powers become available. Unsurprisingly, the announcement made headlines within the HR community and further afield.

The initiative was part of a trend towards Scotland taking greater control of how its workplace matters are regulated and resolved. The changes proposed would 
form part of wider plans borne out of the post-referendum Smith Commission to devolve the functions of employment tribunals in Scotland from the UK administration to the Scottish Courts and Tribunals Service. This new body was established in April this year with the combination of separate Scottish court 
and tribunal structures. Currently, employment tribunals remain within the UK-wide HM Courts and Tribunals Service but will be devolved to the Scottish equivalent. Within the UK system, the Scottish employment tribunals have, for a number of years, had their own regional president who has designated powers to regulate how claims are dealt with, mainly by issuing practice directions. These powers are limited in a number of ways but would by their nature be expected to increase as a result of the restructure.

Since their inception in the 1960s, the 
then-named industrial tribunals were intended to be a cheap, speedy and simpler alternative to formal courts in resolving employment disputes. However, their accessibility, coupled with increased employment rights in recent decades, has placed greater stress on the publicly funded system as claims have increased. Unlike the convention within the court system where a successful party could expect to receive an award of costs (or in Scotland, expenses), the tribunal rules stipulated that they would only be ordered where a party’s conduct was abusive, vexatious, disruptive or otherwise unreasonable. A relatively strict approach to that test entailed that a claimant would seldom be put off raising a claim by the risk of having an award made against them in the event of losing.

Numerous attempts to ease the burden of an ever-growing caseload were made, such as the introduction of statutory minimum disciplinary and grievance procedures, only to be recognised as adding to, rather than alleviating, the demands on the tribunal system. As a result, in many cases they were scrapped.

Following consultation, the UK government implemented a system from July 2013 whereby, for the first time, individuals would have to pay to pursue their claims. Fees became payable in two stages – on presenting the claim and then shortly before the hearing. Claims of unfair dismissal and unlawful discrimination now require a total fee of £1,200 to be paid, whereas the cost is lower to pursue a simpler claim, such as for deduction from wages. A means-tested process for the remission of the fees was created, however it was criticised for being too technical and difficult to negotiate.

Pro-claimant groups voiced concerns that valid claims would be denied a remedy on economic grounds, and the fees system was challenged in both the Scottish and English courts. Statistically it was clear that the effect of the introduction of fees was to immediately and drastically reduce the number of claims. The Tribunals Service reported that for the first complete quarter after fees were introduced – October to December 2013 – the number of claims lodged fell by 79% compared to the same period the year before.

The First Minister’s announcement came just days after the English Court of Appeal dismissed Unison’s attempt to judicially review the system, realistically spelling the end of that route to change. The UK government announced in June that there would be a review of the fee regime, but without promising to consult at large. In response, written representations were made by the president of the English and Welsh employment tribunals. They recognised that the introduction of fees has been unsuccessful in terms of shifting the cost of claims more fairly onto tribunal users rather than taxpayers generally, therefore encouraging disputes to be resolved less formally or providing an appropriate degree of access to justice. However, the president’s proposals focus more on restructuring the fee system 
rather than removing it altogether. Indeed, they discuss additional fees in cases involving more extensive procedure, and 
the possibility of respondents’ fees.

With the Scottish devolution proposals, employers and employees appear to be on the verge of a reality where, for the first time in any material sense, the process of handling employment claims will be different on each side of the border. That is not to ignore current local practices as alluded to above, such as the process of disclosure, reliance or otherwise on witness statements drafted in advance of the hearing, attitudes to witnesses viewing evidence given by others before they take the stand, or the separation or combination of liability and remedy issues when scheduling a hearing. All tend to be handled differently depending on whether the tribunal is in Scotland or not, and often to the cost of the inexperienced. That said, with the majority of employment law and tribunal practice, and crucially the available remedies, being the same in both legal systems, there is little reason for a claimant not to have a dispute handled locally, as happens currently by default. However, issues such as the presence or absence of a requirement to pay what most claimants would view as a significant sum is arguably a greater personal consideration. Further, as yet unannounced or unknown changes to the Scottish system may similarly influence potential claimants. Might we see in the future different service requirements for acquiring rights such as unfair dismissal? Could time limits for presenting claims vary? Will there be different rates and limits for calculating compensation?

If or when Scottish tribunal charges are removed or other variations in practice are introduced, it will be interesting to see the effect on the number of claims presented, not only by Scottish-based workers but also employees of UK-wide businesses who may see an opportunity in some cases to avoid English or Welsh fees or otherwise pick a system that best suits their claim. As matters stand, a claim can be lodged with any tribunal covering a place where the employer resides or carries on business. Clearly that would open up the ‘forum shopping’ issue for thousands of UK employees. Whether and how any different eligibility criteria would be introduced is still to be determined.

So, when will things change? The proposed devolution of Scottish employment tribunals and revisals to the system of fees are expected to happen following the enactment of the current Scotland Bill, anticipated in the spring of 2016. It is worth noting that opinion is varied as to whether the current wording is sufficient to allow the Scottish Parliament to carry out all of its proposals, or whether further revisal would be needed.

Similarly, it is clear that the focus of the proposed changes is the administration of employment claims rather than employment law itself, which is intended to remain almost exclusively within the scope of the UK Parliament (to the extent, of course, not imposed by European law) for the time being at least.

Thus, when the First Minister said that in the next six months the Scottish Fair Work Convention will put in place a new framework to manage relationships between employers, employees and 
trade unions, as well as public bodies 
and the government itself, and expressed the view that there would be vigorous opposition in Scotland to the UK government’s proposed legislation aimed at limiting trade union powers, it was on the basis that any such legislation remains in the domain of Westminster and would – for now – be debated and finalised there. Inevitably however, the legal system is a product of wider society and it will be of great interest to see how far the current movement for more devolved powers is reflected in the path that Scottish employment tribunals take.

By Brian Campbell, 
legal director, Brodies LLP.