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Costs in the Employment Tribunal – ‘an exception not a rule’

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Can you recover your costs for defending a tribunal claim?

A common question asked by many employers faced with employment claims is whether they can recover their costs in the event they are successful in defending a claim. Both parties involved in an employment dispute will inevitably incur costs throughout the proceedings. The likely costs will depend on the nature and complexity of the claim but, for many, the costs can be significant. 

Employment tribunal claims differ from most civil claims pursued in the County Court in that the unsuccessful party is rarely ordered to pay the other sides legal costs and disbursements. This is a frustrating concept for employers who are sometimes faced with spurious claims form disgruntled employees. 

Whilst the general rule in the tribunal is for each party to bear their own legal costs, tribunals do have the power to make a costs order against either party in certain circumstances. The following scenarios may give rise to a deviation from the general costs rule: 

  •  A party or their representative has acted vexatiously, abusively, disruptively, or otherwise unreasonably in the bringing or conducting of the proceedings, or a part of them; or
  • Any claim made in the proceedings by a party had no reasonable prospect of success.

A Tribunal may also make a costs order where either of the following apply: –

  • A party has breached any order or practice direction; or 
  • A hearing has been postponed or adjourned on the application of a party.

There is one further scenario whereby the tribunal must make a costs order. However, this relates to costs payable by the Respondent (employer) to the Claimant (employee). This arises when there is a postponement or adjournment of a final hearing in an unfair dismissal claim. The Tribunal will order costs incurred as a result of the adjournment or postponement if: 

  • The Claimant has asked the respondent to be re-instated or re-engaged not less than seven days before the final hearing; and
  • The postponement or adjournment of the final hearing has been caused by the Respondent’s failure to adduce evidence as to the availability of the job from which the Claimant was dismissed or of similar or comparable employment.

What orders can the Tribunal make?

If you are able to establish that any of the above circumstances apply, then the tribunal may

  • order the offending party to pay the costs of the other party, where the latter has had legal representation; or
  • make a ‘wasted costs award’ directly against a paid representative (where there has been an improper, unreasonable or negligent act or omission on the part of the representative); or
  • award costs in favour of a lay representative; or 
  • where a party has been unrepresented, make a ‘preparation time order’ in respect of the time the party has spent preparing for the hearing. 

The tribunal clearly has a wide discretion when it comes to deciding whether or not to make a costs order and employers should be mindful that tribunals are often reluctant to do so; particularly when the other side is not legally represented. However, whilst costs orders are generally harder to obtain against an unrepresented Claimant, the EAT Decision in Liddington v 2gether NHS Foundation Trust demonstrates that this is still possible. The EAT in this case upheld a costs award against the Claimant on the basis that the Claimant had failed to articulate her case and was ill prepared for the hearings. 

What steps can an employer take?

An employer who reasonably believes that any of the above circumstances apply should consider sending a strongly worded costs letter to the Claimant in advance of the final hearing. This can be a useful tool in persuading claimants to withdraw or settle their claim. The letter should outline the basis on which you intend to seek recovery of your legal costs and disbursements, citing any unreasonable behaviour. Such letters will not always be suitable and employers should ensure that they have sufficient grounds to warn Claimants of the potential cost consequences. 

Another useful tactic that can be utilised by a Respondent is an application for a deposit order. This is not strictly a costs order but it allows the tribunal to call a preliminary hearing to determine the merits of certain allegations made in the Claimant’s ET1 form. If the tribunal consider that any particular allegation has little prospect of success, then they can make an order for the Claimant to pay a deposit of up to £1,000 per allegation. Should the Claimant decide to continue with the allegation, and subsequently lose on this point, then there are cost consequences for the Claimant. The deposit paid by the Claimant in respect of the allegation can be used to satisfy all, or part of, the costs award. 

If you have a question in relation to costs in the Employment Tribunal or about any other aspect of employment law, please do not hesitate to contact the employment team at Monarch Solicitors on 0330 127 8888.

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