Workplace Report March 2013


Trade unionists will be among the millions who will lose out

Government reforms changing the way that civil cases are processed and funded will start to take effect next month. The reforms apply across civil litigation, but will particularly affect personal injury claims. Workplace Report examines the changes and the impact they could have on trade unions and their members.

The reforms to civil litigation funding and costs in England and Wales will be implemented by Part II of the Legal Aid, Sentencing and Punishment of Offenders Act 2012 (LASPO), as well as through secondary legislation including Civil Procedure Rules.

The changes follow a review carried out by the Court of Appeal Judge, Lord Justice Jackson, under the previous Labour government. Its purpose was “to carry out an independent review of the rules and principles governing the costs of civil litigation and to make recommendations in order to promote access to justice at proportionate cost”.

The reforms cover a number of issue including ‘No win, no fees’ agreements and legal insurance.

Where the reforms will hit

The reforms will affect civil litigation funding in England and Wales and include the following.

No win, no fee agreements

“No win no fee” conditional fee arrangements (CFAs) are arrangements where the lawyer representing the claimant agrees not to take a fee if the claim fails. If the claim is successful, the lawyer charges an “uplift” — known as a success fee on top of their other costs. They have been widely used in personal injury cases since the 1990s and were previously encouraged by the government as a way of softening the impact of the withdrawal of legal aid. The maximum a lawyer could charge was 25% of damages (excluding damages for future care and loss).

Until now, the success fee has been paid by the losing party on top of the winning party’s ordinary legal costs. But from 1 April 2013 the success fee will no longer be payable by the losing side. If one is charged, it will be paid by the winning party out of their damages.

Legal insurance

People taking a personal injury claim can take out insurance to protect themselves from having to pay certain costs if they lose the case. There are two main types of legal expenses insurance: before the event (BTE) insurance and after the event (ATE) insurance.

BTE insurance covers the risk of potential future legal costs and liabilities and is paid before the event occurs. It is often purchased as an add-on to existing insurance policies like motor or home insurance. The government is not making any changes in this area, but it is encouraging a greater uptake of BTE insurance to help with the cost of legal cases and as an alternative to ATE insurance.

ATE insurance protects the claimant from having to pay certain legal costs and is taken out after the accident or incident has taken place. ATE insurers undertake to pay the defendant’s costs in the event that they lose the case. It is typically never paid by claimants, but recovered (for example, from employers) where the personal injury claim against them is successful.

For ATE insurance taken out before 1 April 2013, the insurance premium is payable by the losing defendant. But after 1 April 2013 ATE insurance premiums will not be recoverable in personal injury cases.

In addition, unions will no longer be able to recover their own self-insurance costs.

Referral fees

LASPO will also ban referral fees in personal injury cases. These are payments made for the referral or introduction of any client or potential client.

Extension of the Road Traffic Accident (RTA) portal to personal injury claims

In addition to the LASPO reforms, all personal injury claims under £25,000 will go into an electronic portal with fixed-costs. This was also scheduled to happen in April 2013, but may now be delayed until October this year.

The coalition government claims that its reforms will make costs more proportionate and discourage unnecessary or “unmeritorious” cases. However, unions say they will restrict access to justice and reduce compensation awards for people injured or made ill through their work.

They could also mean that some unions (and advice centres) will no longer be able to offer a free legal service because of changes to the way that personal injury cases are processed and funded.

Reduced access to justice

A recent survey of trade union legal services in the February issue of Labour Research, the sister magazine of Workplace Report, saw these and other reforms, currently in the pipeline, as major challenges. So just what will these reforms mean for trade unions and their members?

TUC senior policy officer Hugh Robertson told Workplace Report: “At present, we don’t know exactly how all these reforms will impact on trade unions and their members, because all the details have not yet been announced. For example, we do not know what the fixed-costs for personal injury cases below £25,000 will be, or how unions will be affected by, or respond to, the ban on referral fees. But what is clear is that many of the reforms will limit access to justice.”

And, writing on the TUC’s Touchstone Blog, he said: “Union members will be among the millions who are deprived of the ability to claim compensation, or who will lose damages. As many as 25% of injury claims will not be brought. Those that proceed might lose up to 25% of damages for the success fee, and further substantial reductions for required legal expense insurance.”

He explained that the changes to recoverable legal expense (ATE) insurance premiums, union self-insurance premiums and success fees will mean that many people will no longer be able to obtain representation, particularly for low value or complex cases. Even if they can obtain representation, many of those on low or middle incomes may decide not to claim because they are unable to fund upfront costs (including expert and court fees) or are concerned about the risk of costs if they lose their case. And those who do decide to take a claim then face deductions from their damages.

Robertson told Workplace Report: “The changes to before the event (BTE) insurance could be seen as an attempt by the insurance industry to push BTE insurance policies. Most BTE policies are rolled into other insurances like household insurance and many people do not even know they have it. However most policies are limited in what they cover. People may think, wrongly, that they can rely on BTE insurance rather than their union for taking a claim.”

According to Unite’s director of legal and affiliated services Howard Beckett: “The LASPO reforms will make it a real challenge for people injured through no fault of their own to find lawyers prepared to represent them unless their case is very straightforward, and if they do they face deductions from their damages.”

“Ending recoverability of ATE insurance premiums (insurance for legal costs and costs of medical and other expert reports and disbursements should the case be successful) will mean that a ‘pot’ built up in cases that are won will no longer exist, so there will be no funding for anything other than straightforward cases.”

Impact on other legal services provided by unions

It is unusual for unions to take a referral fee for referring cases to a solicitor. Instead, most unions have negotiated their legal arrangements with a particular firm of solicitors or a panel of solicitors — the GMB general union, for example, has separate arrangements in each of its regions.

Those solicitors then deal with claims on behalf of the union, but provide other legal services to union members on a free or discounted basis. For example, the Labour Research survey of union legal services revealed that six out of the seven large TUC-affiliated unions surveyed provide free or discounted rates for services, such as writing wills and dealing with probate or conveyancing fees when moving house.

However, the referral fee ban could prevent some unions from providing these additional legal services, according to Usdaw’s health and safety officer Doug Russell.

In addition, the costs claimed for dealing with personal injury claims on behalf of union members — around 95% of which are successful — cross-subsidise cases in other areas, such as discrimination, which can be complex or are more risky because they are being taken as test cases to make new law.

It is not yet exactly clear how the referral fee ban will work in practice and its impact on unions as the Civil Procedure Rules are still awaited from the Solicitors Regulation Authority (SRA).

“There still seems to be a lot of uncertainty about what constitutes a referral fee, and if benefits-in-kind will fall within the definition, for example,” Russell told Workplace Report: “However, the bottom line for Usdaw is that we are committed to still issuing claims and recovering the compensation our members are entitled to and will bear any increased costs.”

Limited fixed costs for claims under £25,000

At the same time as the LASPO reforms take effect, the government is also forcing cases through an electronic “portal” with limited fixed costs — although again the detail concerning what the costs will be fixed at is still awaited and the extension of the portal to personal injury claims could be delayed from April until October 2013.

Beckett explained: “All personal injury claims under £25,000 will go into an electronic portal from April 2013, which is currently only just coping with simple road traffic. This includes employer liability claims and most industrial diseases. The proposed scheme will fix costs payable to lawyers to sums that bear no relation to the real costs of fighting the claims.”

Unite also says that a pre-action protocol and a “portal” for all mesothelioma claims will lead to increased delay and result in more victims dying before compensation is paid.

Reduced compensation for work-related assaults

On top of the changes outlined above, the coalition government has already slashed the compensation paid to victims injured in work-related assaults through its £50 million cuts to the Criminal Injuries Compensation Scheme (CICS). These will reduce the amount of compensation paid through the scheme each year from £200 million to £150 million.

Government cuts to the Criminal Injuries Compensation Scheme

The government has already reduced the compensation awarded to victims of violent attacks at work through its cuts to the Criminal Injuries Compensation Scheme (CICS).

The first version of the scheme was established in 1964 in order to compensate innocent victims who suffer personal injury as a result of violent crime. It pays out to victims who are unable to claim compensation from any other means. The cuts will affect union members in a wide range of sectors and occupations.

Shopworkers’ union Usdaw says that many of its members who are injured in armed robberies and assaults will no longer be eligible for any financial support.

The CWU postal workers’ union says the cuts will hit its members in situations where, for example, postal workers are attacked by a dog whose owner is on benefits with no assets. A successful prosecution under these circumstances would not guarantee any compensation for the victim.

Meanwhile, the rail union RMT says that members experiencing a disabling mental illness because of witnessing a fatality on the track, or who are attacked might no longer be eligible for compensation.

And the teachers’ union NASUWT points out that claims involving teachers who have been assaulted by pupils are extremely difficult to successfully pursue as negligence claims. It says that in most of these cases it is it is difficult, if not impossible, to prove to a court that the specific risks posed by the pupil or pupils concerned were foreseeable to the employer.

The union has been able to obtain compensation for members who have been assaulted in these circumstances from the Criminal Injuries Compensation Authority (CICA). In 2011, 11 union members received a total of £108,374.

The CICA has awarded compensation to between 30,000 and 40,000 people each year, but the reforms are expected to slash payments to nearly 90% of victims of violent crime.

Revisions to the scheme came into effect in November 2012 and mean that those suffering from minor injuries, previously awarded between £1,000 and £2,000 under the lowest of five tariffs, can no longer claim compensation. Injuries now excluded include a broken nose, the loss of a tooth (unless at the front), a fractured hand or a dislocated shoulder from which there has been substantial recovery.

The new minimum amount of compensation — £2,500 — is for injuries serious enough to warrant an award while the upper limit remains at £500,000. The public services union UNISON says this represents a cut in real terms (that is, adjusting for inflation) of nearly 40%.

According to Usdaw:

• 50% of victims who were previously eligible for compensation will receive nothing in future, even for quite serious and permanent injuries (18,600 cases on average, 2008-10);

• over 40% will see their compensation claim severely reduced (15,300 cases);

• only 9% of victims (3,200 cases) with the most severe injuries or fatalities will be eligible for the same amount of compensation. These amounts have not increased at all since 1996; and

• payments for loss of earnings (for those off work for more than 28 weeks) are also drastically cut. Rather than the victim’s average earnings, only the level of Statutory Sick Pay (currently £85.85 a week and likely to rise to £86.70 from 6 April 2013) will be paid to those with long-term and permanent disabling injuries, to those unable to work again, and to dependants of fatally injured victims.

The government has provided £50,000 for a discretionary hardship fund for those in very low-paid employment who are badly affected and who are temporarily unable to work. But this comes nowhere near the annual cut of around £50 million.

In addition, UNISON points out that there is now a more stringent requirement for people attacked at work to quickly report the attack to the police. Previously, a report to their employer was sufficient.

Removal of civil liability from health and safety offences

The government is attempting to amend the Health and Safety at Work etc Act 1974 (HSWA) through a clause it introduced at a very late stage of the Enterprise and Regulatory Reform Bill, which is currently progressing through Parliament.

The amendment would remove civil liability from health and safety offences, and says Beckett, will compound the challenges unions are already facing.

The amendment stems from the 2011 Löfstedt report, Reclaiming health and safety for all: an independent review of health and safety legislation. Professor Löfstedt’s review included an examination the role of health and safety law in the civil justice system and claimed that employers’ belief in a “compensation culture” is contributing to over-compliance with health and safety regulations.

He raised concerns that some health and safety regulations impose strict liability (that is, employers do not have the defence that they did all that was “reasonably practicable”) and means that they are legally responsible for any damage and loss caused by their acts and omissions if they have breached the regulations.

However, Löfstedt recently set out in a follow-up report on how his review is being implemented that the coalition government is going much further than he proposed.

“My understanding is that the proposed amendment to the Health and Safety at Work Act reverses the current position on civil liability,” he said. “This means that, unless exceptions apply, claims for compensation in relation to breaches of health and safety legislation will need to prove that the employer has been negligent. The approach being taken is more far-reaching than I anticipated in my recommendation.”

According to Robertson, writing on the TUC’s Stronger Unions blog: “Professor Löfstedt had simply recommended that regulatory provisions that impose strict, (not civil), liability should be reviewed by June 2013. He took the view that regulations should be qualified with “reasonably practicable” where strict liability is not absolutely necessary or amended to prevent civil liability from attaching to a breach of those provisions. He did not recommend a blanket removal of strict liability from health and safety law. The review that he recommended does not seem to have been conducted beyond a simple impact assessment by officials and there was no consultation on the proposals before they were introduced in the amendment.”

The TUC explained in a November 2012 briefing on the proposed changes to strict and civil liability that civil claims for personal injury can be brought via two routes: the common law duty of care, in which the claimant must prove negligence; and/or breach of statutory duty in which the claimant must prove that there has been a failure to meet a particular legal standard.

The effect of the government’s amendment would be to remove the opportunity to bring a claim for breach of statutory duty so that only a claim for negligence would be available for most claims. These cases would then be more difficult and complex to pursue and would result in workers (or their dependents) losing out on compensation.

“The amendment will not change the fact that the employer will have broken the criminal law. They will still be liable to prosecution in the court. All that changes is that the victim will now be denied the right to compensation,” said Robertson. “Since 1898 the law on claiming compensation for workplace injury, where the employer has breached their statutory duty, has been very clear. This change will not only put the clock back over a hundred years, it will create considerable legal uncertainty.”

It will also have implications for the public purse. In many personal injury cases, compensation is needed to pay for round-the-clock care, and if compensation is unavailable it is likely that these costs will have to be picked up by the NHS and local authorities.

Earlier this month, the House of Lords rejected the amendment, following campaigning against the government’s amendment by the TUC, unions and organisations including the Association of Personal Injury Lawyers (APIL). However, the coalition government will, more than likely, reintroduce it when the Bill goes back to the House of Commons.

Impact on health and safety

Unions say that the government’s reforms to personal injury claims will not only affect individual worker’s compensation and unions’ ability to provide free legal services, but will also have a negative impact on health and safety standards.

“Compensation claims are a strong indicator that something is going wrong. If workers are denied access to justice and unions and employers don’t find out about injuries and illnesses, they are not going to be able to prevent them. It is vital that despite these reforms, reps and members still bring claims forward to their unions,” Robertson told Workplace Report.

He added: “It is clear that the reforms are not just about personal injury compensation. They are part of the wider attack on workers’ rights by the coalition government, which is watering down health and safety standards and its enforcement, introducing fees for employment tribunal cases, doubling the qualification period for unfair dismissal and reducing consultation periods for large-scale redundancies.”

For the time being, the coalition’s reforms will not affect diffuse mesothelioma claims. However, they are to be reviewed as part of a wider consultation on mesothelioma claims due to be launched in spring 2013. What’s the odds these claims remain unaffected?