Employment tribunal costs: difficulties of recovery against a losing party

Employment tribunal costs: difficulties of recovery against a losing party

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Author: Simon Fennell

Lord Sugar's recent win in employment tribunal proved bitter sweet when he was unable to recover any of his costs, but his experience is far from unusual.

The starting point for litigation in the employment tribunal, unlike other courts, has always been that both parties bear their own costs and the losing party is not automatically required to contribute to the winner's legal expenses. However, in certain very limited circumstances it is possible to ask a tribunal to make an award of costs.

Lord Sugar is just the latest in a line of frustrated Respondents unable to persuade an employment tribunal to award costs against a losing claimant. In his case, not even a judgment stating that the case "should never have been brought" was sufficient for Lord Sugar to be able to recover some of the £50,000 costs that had been incurred in defending a claim for unfair dismissal by former winner of The Apprentice, Stella English.

It is very hard to persuade a tribunal that costs should be awarded. The most recent statistics (for the 2011/12 Tribunal year) show that 1,411 costs orders were made, a tiny figure when compared to the 230,000 cases that were disposed of in the same period. When the anomaly of a single case in which 800 claimants were ordered to pay costs of £5 each, the picture becomes even bleaker with the number of orders reduced to 612 with a median award of £1,730.

Why is it so hard to get costs and will it get any better?

Until 29 July 2013, the Employment Tribunal Rules placed the bar very high with the circumstances when a tribunal must award costs being limited to those occasions when a party forced a hearing to be adjourned.

The discretion of a tribunal to award costs in other circumstances was limited to those cases where it could be shown that a party had acted vexatiously, abusively, disruptively, or otherwise unreasonably or where a case was shown to be misconceived.

The new rules, in force since 29 July 2013, have seen a change in terminology in relation to both scenarios. While the circumstances in which a costs order must be made are no less onerous, the scope for a tribunal to exercise its discretion and award costs in other cases could be said to have been increased.

The original test of a party having acted vexatiously, abusively etc. remains but is now accompanied by an option to award costs where any claim made in the proceedings by a party had no reasonable prospect of success. Furthermore, costs may also now be awarded against a party that has been in breach of any order or practice direction or where a hearing has been postponed or adjourned on the application of a party (usually at short notice).

On the surface at least, the rules provide greater opportunities for parties to apply for and be awarded costs.

Other changes to the rules include: allowing Employment Judges the power to assess costs that are in excess of £20,000, something that was previously only the preserve of the civil courts; deposit orders of up to £1,000 in relation to any separate allegation relied on by a party; and a new 'sift' process which for the first time gives Employment Judges the chance to make an early assessment of the information available and, where necessary, order a party to show further information or strike claims out weak claims.

Comment

Whilst it remains to be seen whether the new rules will see an increase in the number of cost orders made in the employment tribunal, the scope and tools are now in place should the judicial will be so inclined. It is however likely to take sometime for the culture to change. What is clear is that it has never been so important for claimants and respondents to focus properly on tribunal litigation and to comply with the case management directions and other orders imposed. The message must be to keep your own house in order and hope that you can take advantage when opponents do not.

About the Author

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Simon Fennell

Senior Associate

03700 86 8371

Simon is an experienced employment specialist works with both the private and public sector in relation to contentious and non-contentious work. He provides advice on all aspects of employment law. Simon has many years of experience working with public sector clients but is also the main point of contact for employment advice with a variety of commercial and retail clients, many of which are household names.

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