Funding & Costs

Funding and Costs

Employment Tribunal litigation is costly: a two day trial might cost each side as much as £15,000 in lawyer’s fees. This is a problem not only for the employee (“the Claimant”)  but also for the employer (“Respondent”) particularly when combined with the rule that the winner cannot generally recover its costs from the loser. Indeed for the employer the real cost may be much higher once the time of the managers attending the Hearing as witnesses is factored in.

As a consequence, many employer s prefer to take a “commercial approach.” Suppose the case is worth a maximum upon success of £15,000 but the  is going to involve  a two day hearing for which the employer’s anticipated future costs are £10,000. Logically it would pay the Respondent anything up to £10,000 by way of settlement however weak the case may seem. On the other hand many employers are reluctant to settle too easily on the grounds that this would be to invite further weak claims from other disgruntled employees.

The employer’s position is particularly difficult if the employee has Legal Expenses Insurance and is to be indemnified against legal costs win or lose usually up to £25,000. In that situation, the Respondent has very little bargaining power in settlement negotiations. Contrary to what is said in the popular press no win no fee lawyers are much less of a problem (except perhaps in to relation very low value claims) because they face the prospect of not being paid at all if the case is lost. Consequently they are likely to adopt a reasonable approach to settlement.

Tribunals do have power to award costs against a Claimant up to a maximum of £20,000. They can award costs if the employees case never had a reasonable chances of succeeding of if the employee has conducted the case unreasonably. Howevever these powers are not used very oftenIn 2011-2012, there were 186,000 claims but only about 1,400 cost orders. Though most of them were in favour of Respondents, the average award was only £1292.

In particular there is no automatic rule that costs will be awarded against an employee who has turned down a reasonable offer.

From the summer of 2013, the government introduced fees payable by Claimant’s in  employment tribunals. It is hoped by the government that these will be a deterrent to employees bringing weak cases. The fee is £250 upon filing the claim and a further £950 shortly before the Hearing.

The costs of Employment Tribunal cases  make it important to try and limit the number of issues the employee is allowed to raise or to get it dismissed (“struck out”) at a Preliminary Hearing. Thus if one or more of the Claimant’s claims is “out of time” i.e. was issued toolate then you may be able to have it  “struck out”. A claim can also be struck out if it has “no real prospects of success”. However this is fairly rare because a Tribunal will refuse to strike out a claim if there is a substantial dispute as to the facts. Applications to strike out are considered only on the documentary evidence and oral evidence is not normally allowed. The Courts are particularly reluctant to strike out discrimination claims because the House of Lords held in a case called Anawanyu that discrimination claims raised questions of fundamental importance and should be fully and properly heard.

A Tribunal may be more willing to make a “Deposit Order” at a preliminary hearing.  The Tribunal can only make this order if the Claimant’s case has little real prospect of success. If that is its view it can order the Claimant to pay up to £20,000 to the Tribunal on the basis that s/he may be ordered to pay costs after the full hearing because the case is weak.  The deposit order is a payment on account of costs. If the Claimant succeeds the deposit is returned to him. If costs are awarded against the Claimant the deposit is paid to the employer . Many Claimants simply can’t make the payment (as is of often the case) so the case effectively comes to an end.

While it is in many respects a bad thing for you that costs orders are very rare, it too has an upside.  Suppose the employee has a good claim unfair dismissal with lost earnings of £15,000 but the cost of three day hearing will be £12,000. In that situation it becomes uneconomic to take the case to trial and the Claimant may well be willing to settle cheaply.


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