Costs orders 



As a general rule, in the employment tribunal each party pays its own legal costs. However, there are limited circumstances in which costs may be awarded. 



Although still comparatively rare, the number of costs orders made by tribunals has been increasing alarmingly year on year, (although the most recent statistics show a slight dip). In 2014-15, 870 costs awards were made, compared with 889 in the preceding year. There has also been an on-going increase in the number of tribunals making orders for costs “to be assessed” by the County Court — a process that results in larger costs orders (see below).


In 2014-15, there was a sharp increase, for the first time, in the number of costs awards (536) made to claimants against employers (334 awards were made against claimants). The median costs award in 2014-15 was £1,000.


Tribunals can award costs where a party or their representative has acted “vexatiously, abusively, disruptively or otherwise unreasonably”, or where the proceedings were “misconceived” (i.e. had no reasonable prospect of success).



Here are some examples of conduct that can lead to a costs order: 



• making extensive and unfocused requests for unnecessary documents;


• not complying with case management orders;



• insisting on including large quantities of documentation in the bundles and then not using them at the hearing;



• insisting on pursuing arguments that the tribunal has already warned have no chance of success; 



• failing to provide details of allegations, after being repeatedly asked to do this by the other side and the tribunal;


• withdrawing a claim without justification shortly before the hearing;



• refusing to consider a reasonable settlement offer and insisting on an unreasonable sum;



• abandoning claims at the last moment without justification;



• asking for last minute amendments;



• refusing to follow tribunal guidance about joint expert medical evidence;



• insisting on including “without prejudice” or privileged material in the tribunal bundles;



• abusing tribunal members, representatives or the other side;



• intimidation;



• lying; and 



• making unjustified secret recordings.



Unreasonably failing to issue a grievance, as required by the Acas Code, can lead to an order for costs because it represents a “lost opportunity” to settle the claim (Topic v Hollyland Pitta Bakery [2012] UKEAT 0523/11/1903). 



A tribunal should warn an unrepresented claimant that they are at risk of a costs order if they carry on without changing their behaviour, and only make the order if the warning is ignored. 



When deciding whether to order costs, a tribunal can take into account a claimant’s genuinely held belief that their claim had a good chance of success. However, once a claimant has been warned by the tribunal that the case is weak and that they are at risk of a costs order, this line of argument becomes far less persuasive.



A tribunal has the discretion to consider a party’s ability to pay before making a costs order. Normally, this means looking at income and expenditure, but it can also include capital. A tribunal that decides to disregard ability to pay must explain why (Doyle v North West London Hospitals NHS Trust [2012] UKEAT 0271/11/0404). One good reason for disregarding ability to pay is where a party has lied about their means (Shields Automotive Limited v Grieg [2011] UKEAT 0024/10/1507), or has failed to provide adequate evidence of their means (Jilley v Birmingham and Solihull Mental Health NHS Trust (UKEAT/0584/06). Both income and capital can be taken into account – even the equity in a party’s home.


“Future earning capacity” can be taken into account, but only if there is evidence that the estimated future earning capacity is reasonable and likely (Herry v Metropolitan Borough Council [2016] UKEAT 0101/16/1612).


The fact that a party “doesn’t need the money”, for example, because they are wealthy, or have employment litigation insurance, is never a good reason not to award them their costs (Mardner v Gardner [2014] UKEAT/0483/13/DA). 



A tribunal judge has the power to award costs up to a maximum cap of £20,000. Alternatively, the tribunal can order that the costs be assessed through a separate process, either by an employment judge or the county court. Where costs are assessed in this way, there is no cap and the amount can be very substantial. Where there is an issue over ability to pay, the employment tribunal should consider awarding only a proportion of the costs, or setting its own cap on the costs to be awarded in the county court assessment (Herry v Metropolitan Borough Council [2016] UKEAT 0101/16/1612).


Costs orders can only cover costs that the other side has actually incurred or is liable to pay. However, costs orders can be made in favour of an employer that used its own in-house legal team, even though they did not incur any bills to outside solicitors (Ladak v DRC Locums Ltd [2014] UKEAT0488/ 13/1606).


A wasted costs order can also 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”. 



Finally, preparation time orders can be awarded to a party who has not incurred any legal costs. This means that unrepresented parties or those represented by voluntary or not-for-profit sector representatives can also recover costs for time spent preparing. These are made in the same circumstances as other costs orders.