Recovering legal costs in an Employment Tribunal

Legal costs in employment tribunal cases are a significant consideration for both employees and employers.    Unlike in civil courts, where the “losing” party often pays the “winner’s” fees, in employment tribunals, the general rule is that each party bears its own legal costs. 

There are some circumstances where costs may be awarded in Employment Tribunals, however such awards are relatively uncommon. 

Employment tribunals have the discretion to make costs awards in certain situations including the following:

  • When one party acts vexatiously, abusively, disruptively or otherwise unreasonably in bringing or conducting the proceedings.
  • Where a claim or defence has no reasonable prospects of success.

There are other grounds on which a Tribunal may order costs, but these are the ones most often relied upon.

Usually, an application for costs will be made by one of the parties to the proceedings but the Tribunal can also make a costs order of its own volition.

When dealing with an application for costs, the tribunal will apply a two-stage test. 

The first stage is to decide whether the conduct of the party meets the costs threshold (the “threshold test”).   This is an objective test where the tribunal will decide, based on the facts, whether the conduct complained of was unreasonable or whether the claim or defence had no reasonable prospects of success.    

The second stage is a subjective test, where the tribunal will decide whether to exercise its discretion to award costs, having regard to all the circumstances.  

The effect of the two-stage test is that even if a party’s conduct is, objectively, vexatious or unreasonable, or the claim or defence did not have reasonable prospects of success, it does not follow that the tribunal will order costs.

The threshold test is the same whether or not a party is legally represented.  However, if a party to the proceedings is not legally represented (referred to commonly as a “litigant in person”), this is a matter that the tribunal must take into account when deciding whether the threshold test has been met.   This is because litigants in person are less likely to have the objectivity and knowledge of the law that a professional adviser would have and, therefore, they should not be judged by the same standards as one.   

Vexatious or abusive conduct refers to behaviour designed to harass, intimidate, or cause undue difficulty to the opposing party.  It includes actions such as pursuing a meritless claim, not with the expectation of winning, but in order to harass the other party or put them to great expense.    Tribunals take a dim view of vexatious conduct, as it undermines the purpose of the employment tribunal system, which is to provide a fair and efficient resolution of disputes.  

A recent tribunal case involving vexatious conduct is the case of Hargreaves v Evolve Housing and Support (2024).  In this case the tribunal found that the employee had pursued unmeritorious claims in order to satisfy a vendetta that he had against his employer and cause the employer as much damage as possible.   As a result, the tribunal ordered the employee to pay part of the employer’s costs, to the tune of £20,000, concluding that the employee’s conduct was an “extreme example of vexatious, scandalous, and unreasonable conduct” and “was an abuse of the Tribunal’s process”.   

Disruptive conduct is closely aligned to “vexatious” and “abusive” conduct and can involve, for example, a party repeatedly requesting adjournments of hearings and then failing to attend the rescheduled hearings without explanation. 

In practice, however, most applications for costs will be made on the basis of “unreasonable conduct” as it covers a wider range of behaviour than that of “vexatious, abusive or disruptive conduct”.   

“Unreasonable” is to be given its ordinary English meaning and is not to be interpreted as if it means something similar to ‘vexatious’.   It could include actions such as creating unnecessary delays, lying to the tribunal, or failing to comply with case management directions or orders.   It can also include conduct such as a failure to engage with an employer’s reasonable settlement offers. 

In deciding whether to make a costs order for unreasonable conduct, the tribunal should take into account the “nature, gravity and effect” of a party’s conduct.  

An example of unreasonable conduct can be seen in Clements v Secretary of State for Justice (2021).   In this case, the employee failed to progress their claim to the point that 18 months after the claim commenced, the employer still did not know what legal case the employee was advancing.  The employee also deliberately and repeatedly failed to comply with tribunal orders.   The tribunal found that this conduct was unreasonable and made a significant award of costs against the employee.  

Where an application for costs is made on the basis of no reasonable prospects of success, the tribunal must consider first whether, on an objective analysis, the claim or response had no reasonable prospects of success.  The tribunal will look at whether this was the case from the outset, when the claim or response was submitted, or whether it reached this stage at some later point in the proceedings (e.g. when more evidence became available). 

As it is an objective test, it does not matter that, for example, the employee may genuinely believe they are the victim of unlawful behaviour.   

If the costs threshold is met, the tribunal will then apply the subjective test to decide whether to exercise its discretion to award costs.  This will include asking whether, at the stage the claim or response had no responsible prospects of success, the party knew or should have known that it did not have reasonable prospects of success. 

The case of Legge v Environment Agency [2024] 3 WLUK 616 is an example of where the tribunal found that the employee’s claim had no reasonable prospect of success. 

The employee in this case pursued an unfair dismissal claim that had no merit and only withdrew it on the last day of the final hearing.   They also pursued discrimination claims that had no correlation to a protected characteristic and a victimisation claim that had no basis.   The tribunal ruled that there was no reasonable prospect of success and awarded the employer costs on this basis as well as on the grounds of unreasonable behaviour. 

Typically, a party making an application for costs will seek to recover their solicitors’ costs involved in the management of and preparation of the case, as well as barrister’s fees for the representation at the final hearing. 

An unrepresented party can apply for a payment in respect of the time they have spent working on the case.   This is called a “preparation time order”.  The tribunal will decide how many hours of preparatory work the unrepresented party should be paid for.  The tribunal will then apply a set hourly rate to those hours which is currently £41.  

Even where a party is awarded costs, the amount recoverable can be limited.

The tribunal has the ability to award a party up to a maximum of £20,000 in respect of their costs.   The tribunal alternatively may order that a party’s legal costs be subject to detailed assessment whereby a set scale will be used to determine how much legal fees can be reimbursed.  Although there is no limit on the amount of costs that can be awarded where a detailed assessment is undertaken, it is unlikely that full reimbursement will be given. 

The tribunal may (but does not have to) take into account the paying party’s ability to pay into account when considering whether to make a costs order or the amount of the costs order.   What this means is that the tribunal may cap the amount of costs in favour of a party if the paying party is found to have limited financial means.   However, the tribunal must balance the financial hardship that a costs award may cause a party against the need to compensate the other party for costs incurred by them due to the unreasonable conduct.  It is possible, therefore, that someone with limited financial means will still be ordered to pay substantial costs.

An example of this is the case of Vaughan v London Borough of Lewisham and others UKEAT/0533/12 where, although unemployed, the employee was ordered to pay a third of the employer’s costs (potentially as much as £87,000) because of her conduct in the proceedings and her pursuit of an unmeritorious claim.  

In conclusion, while the default position in employment tribunals is that each party bears its own legal costs, tribunals have the discretion to award costs where when one party engages in vexatious or unreasonable conduct or pursues a claim or defence that has no reasonable prospect of success.   Whilst the award of costs should be regarded as the “exception” rather than the “rule”, the cases mentioned above show that the tribunals will not shy away from making – often substantial – costs awards in appropriate cases.   As a result, both employees and employers should be mindful of the legal risks involved in tribunal proceedings and the potential for adverse cost consequences if they fail to adhere to procedural expectations or bring claims or mount defences that do not have any merit.

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The information contained in this blog post is provided for guidance and is a snapshot of the law at the time it is written. It is provided for your information only and should not be used as a substitute for obtaining legal advice that it specific to your particular circumstances.

The guidance should not be relied upon in any decision making process. It is strongly recommended that you seek advice before taking action.


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