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A Guide to Costs Orders in Employment Tribunals

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The number of instances in which costs orders are issued by employment tribunals is increasing. It is therefore more important that both sides in an employment dispute understand the legislation behind costs orders and the reasons why costs might be awarded by an employment tribunal against the losing party.

This article will first provide a brief introduction to employment tribunals. It will then outline the usual process by which costs for such tribunals are paid. Lastly, the main body of the article will focus on those cases when a tribunal may order the losing side to pay the legal costs of the case.

Employment tribunals are non-governmental public bodies whose role is to settle employment disputes. Such disputes are usually between employers and employees; however, they can also be between an individual and the trade union or professional body to which they belong. Decisions made by employment tribunals are legally binding and therefore must be adhered to by both sides.

Common claims that are heard by employment tribunals include cases of unfair dismissal, discrimination, breach of contract, redundancy payments and equal pay. There are, of course, many other reasons why an employee may seek to bring a case before a tribunal.

Usually, in contrast to cases heard in the civil courts, employment tribunals do not award costs against the losing party; the general practice is that each party bears their own legal costs. This system is in place to prevent individuals from feeling that they are unable to bring their case before a tribunal on account of being concerned about having to pay costs should they lose. It should be noted that the costs of a claim are usually much higher for employers than they are for individual claimants.

This means that should an employer be on the receiving end of an employment tribunal claim, they are generally unable to claim their legal costs back from the claimant, even if they successfully revoke the claim.

However, just because costs orders have, in the past, not generally been used by employment tribunals, it does not mean that tribunals are unable to award costs. There are a number of circumstances when a tribunal will order that costs are payable. Such orders can be for a fixed sum of up to £10,000 or, in cases where costs may exceed this amount, involve passing the case on to a county court, which will assess the costs.

According to paragraph 40 of the Employment Tribunals Rules of Procedure, a tribunal can make a costs order where “the paying party has in bringing the proceedings, or he or his representative has in conducting the proceedings, acted vexatiously, abusively, disruptively or otherwise unreasonably, or the bringing or conducting of the proceedings by the paying party has been misconceived”.

This effectively covers cases where:

· A claim is so weak it should never have been brought before a tribunal

· A claim has been brought before a tribunal for improper purposes. This includes cases where claims are made to deliberately harass an employer.

· One side has conducted their claim badly or unreasonably.

Similar rules to these also apply should a case be brought before the Employment Appeal Tribunal (EAT). The EAT is a superior court of record that hears appeals from employment tribunals in England, Scotland and Wales. It is not uncommon for cases to be brought before the EAT should the losing party in an employment dispute feel dissatisfied with the initial decision made by the employment tribunal. There have even been a number of cases when the reason for an appeal centres on legal costs, and indeed the EAT has, in a number of these cases, issued a costs order when the employment tribunal initially had not.

Although costs orders are relatively rare in employment tribunal proceedings, a recent case in which an order was issued has shed new light on what counts as ‘unreasonable’ conduct on the part of the claimant. In Kopel v Safeway Stores Plc, the claimant refused to consider a settlement offer. This act was subsequently deemed to be unreasonable conduct on the grounds that, among other factors, the claimant had not entered into any meaningful settlement negotiations.

The result of this case is that should a claimant fail to consider, in any meaningful way (even by issuing a counter offer) a reasonable settlement offer, they can be held accountable to pay the legal costs of the other side should their case go before an employment tribunal or the EAT..