A recent decision regarding when an employee must pay the employer’s costs

In a recent case in the Employment Appeal Tribunal the decision to order that the employee pay a portion of the Employer’s costs (£10,000) has been upheld.

The Law

The situation with costs has always been different in the Employment Tribunal than in the civil courts and reflects the fact that the Employment Tribunal was traditionally set up for parties to easily represent themselves without the formality of the courts.

In the civil court costs normally follow the outcome of the case, so that the losing party pays the costs of the winning party. In the Employment Tribunal each party normally covers their own costs.
In recent years there have been more costs orders made by the Employment Tribunal in favour of both employers and employees.

The position is that the Employment Tribunal have discretion to make a costs award in certain circumstances. They do not have to do so in all cases but will consider their discretion when an application is made by the winning party in a case.

The circumstances when the Employment Tribunal can make a costs order are where one party (or their representative) has acted vexatiously, abusively, disruptively or otherwise unreasonably. This is in relation to how they have conducted themselves in the proceedings and also in actually bringing the claim in the first place.

If the Employment Tribunal decide that one party should pay some or all of the costs of the other they may also take into account the party’s ability and means to pay. There is no obligation to do so but it is a factor they can consider.

The Facts

In this case the employee Mrs Chadburn was employed by Doncaster & Bassetlaw Hospital NHS Foundation Trust (the ‘NHS Trust’) and following circumstances at work she made a claim to the Employment Tribunal for unfair dismissal and race discrimination.

The NHS Trust defended the claim and were successful in their defence. The Tribunal considered that although Mrs Chadburn had not been unfairly dismissed this part of her claim was reasonably pursued. However with regards to her claims for race discrimination the Tribunal considered that her claims were false and that the allegations had been fabricated by Mrs Chadburn.
After successfully defending the claim the NHS Trust applied to the Tribunal for their costs and the Tribunal considered that Mrs Chadburn’s conduct was unreasonable and they therefore had the discretion to award costs.

The Tribunal ordered that Mrs Chadburn pay the NHS Trust £10,000, which represented part of their costs in defending the claim, i.e. the race discrimination element of the claim. The total cost of the NHS Trust to defend the claim was in the region of £72,000 and the race discrimination claim defence around £35,000 of this.

Mrs Chadburn submitted that she was of limited means and that she would be unable to pay back the money and therefore this should be considered by the Tribunal in their decision.

Despite her limited means the Tribunal considered that she would be in a position at some point in the future as her financial situation was likely to improve as a result of her impending divorce.

Mrs Chadburn appealed against the decision on the grounds that:
1) The Tribunal should not have taken into account her future divorce as this was purely speculative and there was no guarantee she would receive any money in the future from her estranged husband;
2) The Tribunal had based their decision on incorrect information about her debts and her debts were in fact considerably higher than the Tribunal were aware when first making the decision.

The Decision

The Employment Appeal Tribunal did not agree with Mrs Chadburn’s assertions and decided that the Employment Tribunal had been justified in making the costs award on the ground of future earnings alone.

The Appeal Tribunal considered that the Tribunal had relied on the fact that Mrs Chadburn was only 39 and had plenty of time to earn money in the future and pay off the costs award. Although the Tribunal had noted her future divorce may improve her financial position, it was not the main reason for their decision to make a costs award.

With regards to Mrs Chadburn’s debts the Appeal Tribunal stated that they did not have to take into account her debts or financial means at all, it was at their discretion to do so.

In conclusion, there must simply be “a realistic prospect that the party might at some point in the future be able to afford to pay”.

Points to Note

This case will be a welcome decision for many employers who feel that they are at the mercy of spurious employee claims which, even if they have no merit, are costly to defend.

It serves as a reminder that the Employment Tribunal does have a broad discretion to make costs awards, and when considering the employee’s ability to pay, the Tribunal can make a broad-brush assessment of costs award rather than a precise estimate of what they can afford.

For employee’s it is a warning that exaggerating or fabricating claims can be costly.

If you are faced with a claim by an employee which has no merits and which you believe to be fabricated or exaggerated you should ensure that you write to the employee and put them on notice of this fact and that you will make an application for costs when successful in defending the claim. This will certainly assist you when making an application to the Tribunal.

You can read the full judgement of the case here: Chadburn v Doncaster & Bassetlaw Hospital NHS Foundation Trust and another