Review on Employment Tribunal fees Unpaid Britain’s response

On 31st January 2017 the government published a review of the introduction of Employment Tribunal fees. In this report they set out some of their findings and their proposal for reforms to fees. Following the publication of this review they have asked for responses as part of the consultation process (which closes on 14th March 2017). We submitted our response on 9th March 2017 using some of our findings. The review and our response can be found bellow, please have a look and let us know what you think. Comments as always would be greatly appreciated.

Unpaid Britain’s response the review on Employment Tribunal fees

 

Ghosting, Phoenix companies and other grim tales of unpaid Britain

While people flock to see the latest supernatural creatures in JK Rowling’s Fantastic Beasts and Where to Find Them, real life shape-shifters and disappearing acts receive much less attention. People are being ‘ghosted’ by former employers who owe them wages or redundancy payments, and even more galling, some employers, rising phoenix like from the ashes of the previous companies, later reappear trading under a new name to avoid payment.

Successive reforms of the Employment Tribunal (ET) system have made it increasingly difficult to take up complaints regarding underpayment and the abuse of employment rights, allowing much poor treatment of employees to go unpunished. The weakening of unfair dismissal protection in 2012, and the imposition for the first time of a substantial fee to bring claims in 2013 were justified as discouraging ‘vexatious claims’ said to be costly, time consuming, and creating a fear factor for employers. However, there is little evidence that this was ever a significant problem, and is likely to be particularly rare in underpayment cases which generally involve relatively straightforward decisions for tribunals. Even prior to the current fee structure, there were significant barriers to would-be claimants. A number of studies have found that only a small proportion of people experiencing problems at work do anything formal to resolve them, never mind take legal action.

New research by a team (including the author) at the Universities of Strathclyde and Bristol has given voice to those attempting to resolve work-related grievances via the increasingly complex, legalistic world of ETs. Researchers recruited 158 clients who presented with employment problems at Citizens’ Advice Bureaux (CAB) (access points to those who generally cannot easily afford a lawyer or access trade union services). Researchers followed participants across the course of their disputes, logging their thoughts, hopes, fears, struggles and successes, interviewing them at several points. The sample tended to be low-paid workers in elementary occupations; working in the private sector (with contract cleaning and agency work generally featuring heavily as offenders) and who had never been members of trade unions. The gathered data includes harrowing stories of peoples’ struggles to resolve their employment disputes.

Around a third of participants reported an underpayment issue as one of the problems for which they sought advice. Problems included quite straightforward disputes regarding owed wages or holidays involving hourly paid staff which may have been simple down to a mistake on behalf of the employers (e.g. disputes over how many hours had been worked).  More complex disputes included participants enquiring about owed wages or unpaid overtime and then finding themselves dismissed or no longer being provided with any hours of work. CAB advisers saw some underpayment problems so frequently, (sometimes from the same employers) that they looked likely to be deliberate strategies, such as agencies neglecting to pay holiday pay until challenged. Such employers would often pay up as soon as a tribunal claim was lodged, though not before the time and attention of the tribunal system was expended to bring them into line.

Working at the bottom end of the labour market was for some participants not only precarious (in temporary jobs) and lowly paid, but ended up being completely unpaid. Doug, was encouraged by the Job Centre to take a job in construction with a small firm. He worked for several weeks without pay before his employer disappeared. When he returned to the Job Centre to complain and seek advice “they didn’t want to know”. Telling him, “‘that’s between you and the employer it’s nothing to do with us’, basically… I felt they couldn’t care less. ” Doug had thought that “being through the Job Centre” the job “was above board, but obviously it wasn’t.” Doug found his way to the CAB, and submitted an ET claim with their help. Initially the employer denied that Doug had worked for them, before ceasing trading and finally disappearing. Doug gave up chasing the £1000 he was owed.

Doug was effectively ‘ghosted’, by his former employer. People take a job, work for a few weeks (sometimes months) in good faith that their pay will be forthcoming, until their employer (usually a micro firm of less than ten employees), disappears without paying them a penny. When the worker attempts to make enquires, phone calls and emails are no longer answered. The employer,  then appears in a new guise, a phenomenon Citizens’ Advice and other campaign groups are referring to as perpetrated by ‘phoenix’ companies, rising from the flames of supposedly insolvent, burned-out companies. In other cases employers claimed insolvency, often meaning that participants were able to make a claim to the government’s Insolvency Fund, although they were not always able to obtain the full amount they were owed.

Around half of participants with underpayment problems attempted to take legal action, and so are slightly more likely than others to take action (the overall figure was closer to a third). There could be several reasons for this:  firstly, individuals were usually reliant upon the money owed, 2) the claim, being more straightforward may seem easy to win, 3) claimants have a clearer sense of certainty regarding their ‘right’ to take the employer to tribunal. That said, participants often saw a symbolic quality in making claims for unpaid wages. Cheryl, a nursery assistant, wanted £400 of notice pay back on ‘principle’: “I’d worked it and earned it, so I should have it. Even if it was hundred pound or a thousand pound… I thought I’m not going to let this lie, ‘cause it’s money I deserve to get.’

While the certainty of being clearly ‘in the right’ may generally be stronger among those who feel they are owed wages than those claiming unfair dismissal or discrimination, the underpaid  are not necessarily immune from crises of confidence regarding taking legal action. Cheryl, was plagued by doubt and shame at taking legal action. She felt ‘actually quite embarrassed… the only people I told were really close friends and family… I think people often assume there’s something worse to the case when you say, “the tribunal court.” They think, your first employer, ‘that’s a bit much!’’ Problems that should be considered illegal may be conceived as ‘dumb luck’. ETs appear are a highly discouraging prospect to most lay-people. Any relish that might be taken in reaching them usually relates to placing employers who feel they are untouchable in front of ETs.

Of the twenty known outcomes for underpayment cases at ET in the study, ten were successful, seven settled (mostly favourably for participants), and 3 were withdrawn. However, only one of the ten successful awards was received without using formal enforcement procedures, and three of the successful participants never obtained the money owed. Some participants did not feel it was worth ‘throwing good money after bad.’

While the amounts of money owed were the difference between keeping them above the breadline or not, hourly-waged workers barely had the time to attend their own tribunal hearings because of new jobs or job-seeking efforts. For them dreaming-up far-fetched accusations against employers, who may be hard to track down and unwilling or unable to pay in any case would be absurd.

 

 

The delinquent employers’ dilemma: settle or dissolve?

Employment rights in the news

Last week two very interesting (from Unpaid Britain’s perspective) stories hit the headlines. In the first, Mike Ashley, owner of Sports Direct, admitted that 15 minutes of pay was deducted from workers who arrived at work even a minute late. This is a high-profile example of the low-level “gaming” of employment contracts which Unpaid Britain is studying.  The second story saw former Chelsea FC doctor Eva Carneiro  accept a settlement from Chelsea shortly before she was due to testify to an Employment Tribunal (ET). The latter story illustrates a particular phenomenon which we have been examining, as this blog will attempt to explain.

The Employment Tribunal

Since March 2016 we have been analysing Employment Tribunal cases brought before London and Watford tribunal offices for unauthorised deductions from wages. This has so far involved a two week stint at the Bury St Edmunds employment tribunal registry. Even though employment tribunal judgements are public records they can only be accessed via terminals located in the basement of Bury St Edmunds county court. There, surrounded by disintegrating boxes containing paper copies of ET judgements, we went about selecting a random sample of judgments from London for the years 2012 and 2014 (before and after the introduction of fees). Details (parties, jurisdictions, general outcome) of the judgements had to be copied from an old computer screen onto our laptops (no digital downloads!). Then we had to find and scan the paper copies of the judgements. This was a lengthy task; many copies of the judgement are mis-filed and some are absent.

ET computers  ET roling Stacks

Companies House

Back at Middlesex, we reviewed the Companies House databases for the respondent companies named in the judgements. We sought to identify the company’s status, sector and identity of their directors. Companies House has two database systems, of which Beta is the more detailed. However many of the companies don’t appear on it especially if they had been dissolved a few years previously, so a constant transition between Beta and the second (WebCheck) is required.

Half way through this process we decided to examine our findings so far, and they suggest something very interesting about employers who settle.

Preliminary Findings[1]

What is interesting is the marked difference between the status of companies for the different outcomes of claims. Where the case has been “dismissed on withdrawal”, dismissed on settlement (as in the Carneiro case) or fails at a hearing the company is most likely to be still active. Where there is a default judgement (usually occurring when the respondent i.e. the company doesn’t respond to the claim or appear at the Tribunal) or the workers’ claim was successful the company is most likely to be dissolved through insolvency or other means.  What does this reveal regarding these companies intention, or the prospects of workers recovering their wages?

Dismissal on Withdrawal

21% of outcomes out of our preliminary sample were “dismissed on withdrawal”, meaning the “claimant informs the Tribunal through writing or in the course of a hearing that the claim or part of the claim is withdrawn”, following which the Tribunal issues a judgement ruling that the claim is dismissed. This leaves the actual outcome in terms of whether the worker was successful in getting their money unknown.  A case might be settled informally, or in cases such as that of Eva Carneiro a settlement was reached during proceedings and be classified as dismissed on withdrawal. Members from the Unpaid Britain project’s Advisory group call this type of settlement “napkin cases”, when a settlement is agreed and in some cases scribbled onto a napkin just before or during a hearing. However a dismissal on withdrawal could also occur where the claimant no longer wanted to pursue the case, (for reasons such as stress or feeling that the claim might not succeed).

Settlement

Where settlements take place, it may be assumed that the worker received  at least some of their money, but judgements stating that a settlement has occurred are the smallest group amongst our sample. We had many more cases classified as “dismissed on withdrawal”, and  wanted to investigate the likelihood that these had  been withdrawn due to a settlement occurring (this had been suggested to us by legal advisors). To do this we chose to compare the status of respondent companies where we know a settlement has occurred with that of those in cases withdrawn on dismissal. We found the Companies House status of respondents in cases dismissed on settlement to be very similar to those dismissed on withdrawal, with around 80% of companies still being active.  This is in contrast to the profile of other groups of respondents.

Default Judgements and successes

Looking at cases that were Default Judgements the majority of companies appear to have been dissolved, with only a small minority still active. This may not be that surprising: if they are about to be or are already insolvent, employers may be unable or reluctant to defend the case. However where the claim was heard and succeeded (the most common outcome) the majority of respondent companies are now either dissolved or insolvent – only around 30% are still active. Research done by the Department for Business Innovation and Skills  in 2013 found that only 32% of claimants whose unpaid wage claims were successful were paid in full. Larger companies were more likely than small ones to pay awards, and this may be explained by widespread use of insolvency and limited liability to evade payment.

Failed claims

In cases which were heard, but the claim failed, our preliminary findings show that 94% of respondent companies are still active.

What the findings suggest

These findings suggest to us that the majority of cases that are “dismissed on withdrawal” are actually settled before or during the hearing.

One further hypothesis is that if an employer expects to pay the money to their workers they are likely to settle before the hearing, only going ahead with a hearing where they are confident of winning. Settling reduces litigation costs for employers, especially if the unpaid wages claim is linked to other claims such unfair dismissal or discrimination.  Cases classified as being dismissed on withdrawal leave no evidence of guilt of non-payment. This enables the employer to maintain their image both in terms of brand as well as to other employees. Thus systematic non-payment of wages can carry on unnoticed/unchallenged.

Where employers have no intention of paying, however, they may simply fail to defend, leading to a default judgement, or go to a hearing and use insolvency and limited liability to protect directors from any personal cost. It could also be that losing the ET case pushes the company into insolvency, but given that most unpaid wages claims are for few hundred pounds, this could only apply in a minority of cases.

Although we still have a lot of work to do to understand the phenomenon of non-payment and employment tribunal claims, these preliminary findings are consistent with there being a group of employers who “game” the system with apparent impunity.

For the time being we will keep you all updated. Any comments on this blog or our research are as always greatly appreciated.

 

 

 

 

[1] The preliminary findings are based on 205 cases including unpaid wage claims, predominantly made in 2012, and for which the respondent company’s identity has been located at  Companies House. The most common outcome in these cases is that the case has been “dismissed upon withdrawal”.