Costs orders

As a rule, each party has to meet its own legal costs, but there are limited circumstances in which costs may be awarded.

Either party may be directed to pay the travel expenses, accommodation costs, loss of earnings and child or adult care costs of a witness attending the employment tribunal.

In limited circumstances, a tribunal has the power to issue an order for costs against a party (in Scotland they are called expenses). The power can be exercised where that party or its representative has acted “vexatiously, abusively, disruptively or otherwise unreasonably”, or where the proceedings were “misconceived” (interpreted as having no reasonable prospect of success).

An employer should always give advance warning if it plans to ask for an order that the claimant be made to contribute to its costs (Rogers v Dorothy Barley School [2012] UKEAT0013/12/1403).

A tribunal should take into account the “nature, gravity and effect” of conduct (such as lying, for example) when deciding the size of any costs order (Yerrakalva v Barnsley MBC [2010] UKEAT0231).

Failure to accept an offer of settlement by an employer, which — following judgment as to remedy — turns out to be at least as much as the sum awarded may lead to an order to contribute towards the other side’s costs:

A tribunal is obliged to consider whether or not to take an individual’s means into account before making a costs order and if the tribunal decides to disregard someone’s ability to pay, it must explain why (Doyle v North West London Hospitals NHS Trust UKEAT/0271/11/RN). Where an individual is shown to have lied about their means, a tribunal may decide to disregard all information about means when fixing the amount of costs to be paid (Shields Automotive Limited v Grieg UKEATS/0024/10/B1).

A wasted costs order can be made against a legal or any other representative who has caused another party, including their own client, to incur costs through their “improper, unreasonable or negligent act or omission”. This only applies where costs have actually been incurred, and will not therefore apply to voluntary or not-for-profit sector representatives or trade unions.

Preparation time orders can be awarded in favour of a party who has not incurred any legal costs. This means that unrepresented parties or those presented by voluntary or not-for-profit sector representatives can recover costs for their time spent preparing. These are made in the same circumstances as other costs orders.

As of 6 April 2012 the amount of costs that can be ordered (as well as through preparation time orders) is:

• a sum fixed by the tribunal which can be up to £20,000;

• a sum agreed by the parties; or

• the whole or a specific part of the costs incurred.

In his review of tribunal procedures, Lord Justice Underhill proposes that the cap on the amount of costs that can be imposed be removed (draft rule 72). Rather than referring the assessment of costs to a County Court, employment judges would be given the power to assess what costs are due themselves.

Also, Lord Justice Underhill proposes that non-legal representatives be able to apply for their costs to be reimbursed by the other side. The costs would be limited by a cap — which has not yet been set — this would be lower than the level at which lawyers can recover.

In addition to costs, the government proposes giving tribunals the power to levy an additional financial penalty on employers where it is showed that they are in breach of employment rights. These proposals appear in the draft Enterprise and Regulatory Reform Bill.

Also, since April 2012, employment tribunals have the power to order the parties to pay witnesses’ expenses and for the losing party to reimburse the other side the cost of doing so.

Note that since the enactment of the Legal Aid Sentencing and Punishment of Offenders Act 2012, there is no longer legal aid available for any type of employment dispute.