6 things that employers should know about recovering their legal costs in the Employment Tribunal

By Partner, Mark McKeating

This week, the long running saga of Vardy v Rooney hit the headlines again. This time because their respective lawyers couldn’t agree on the level of costs that Rebekah Vardy should pay Coleen Rooney. At a previous court hearing, Mrs Vardy was ordered to pay Mrs Rooney’s legal costs having lost her libel trial.  The lawyers attended court before a specialist cost judge to assess the reasonableness of Mrs Rooney’s costs.

Whilst the dispute is in the High Court and not the employment tribunal, the case highlights the importance of understanding the costs rules in legal proceedings.  In most cases, it could influence your strategy in how to deal with a claim.

Here are 6 things that employers should be aware of in relation to costs in claims in the employment tribunal.

1. Costs are the exception and not the rule in employment tribunal proceedings.

• Costs orders are not made in the vast majority of tribunal cases. On the whole, each side bears their own costs.  This is one of the reasons that some employers decide to reach a commercial settlement rather than incur their full expenditure of fees. Savvy claimants are aware of this!

2. There is a high hurdle to overcome to secure a costs order. In some cases, an employment tribunal may make a costs order where it finds that:

• a party, or their representative, has had acted vexatiously, abusively, disruptively or otherwise unreasonably in the bringing or conducting of the proceedings, or part of them;
• any claim made in the proceedings by a party that had no reasonable prospects of success (and the claimant knew that was the case);
• where a party has been in breach of any order or practice direction – for example, this could be if a hearing has been adjourned or postponed on an application by the party.

3. The threshold remains the same whether the claimant is professionally represented or not, but invariably, judges do not judge a ‘litigant in person’ by the same standards as a professional representative. However, we are seeing a growing trend of employment tribunal judges issuing warnings to litigants in person in some cases. This can be helpful to legal representatives pushing for an early withdrawal of a claim.
4. Costs orders can be made by an employment judge up to £20,000. If the costs exceed this level, the judge can make a referral for a detailed assessment at a county court.
5. Other weaponry at the disposal of an employment judge includes a deposit order. A deposit order can be made by a judge if they consider that any particular allegation or argument in a claim or response has little prospects of success. The order requires a party to pay a deposit order of up to £1000 as a condition of continuing in the proceedings.
6. The ability to pay must be taken into account by a judge. I secured a deposit order against an unrepresented claimant recently. It was clear, the claim stood little prospects of success.   The claimant pleaded poverty. She had lost her job and faced months of unemployment.  The claimant disclosed to the judge that she shared a matrimonial home with her partner who also owned a successful business.  Unbeknown to her, joint assets are taken into account by Employment Tribunals.  In that case, a deposit order was made at the maximum level. The judge also issued the claimant with a written warning that an order of costs could be made if the claim is pursued to a hearing and is ultimately proven unsuccessful.

Some helpful cases for employers on recovering costs:

• Cairns v The Wellness Zone Ltd (2414495/2021)

In this case the employer was awarded £20,000 in costs against a personal wellness trainer who had made serious accusations.  Gradually over time the claimant withdrew most of these claims.  The employment judge found that she told “obvious untruths”, was evasive and that her evidence was “riddled with exaggeration and hyperbole” and “mendacious”.  She provided very little evidence of her inability to pay, which compounded the untruths.

• Mr M Radia v Jefferies International Ltd: UKEAT/0007/18/JOJ

The employer, a financial services company, was entitled to dismiss a senior employee for not being “fit and proper.”

A costs order was made against the claimant (who was legally represented) in respect of the employer’s costs in his unsuccessful disability discrimination claim. Those costs were in the region of £700,000 (although the employer was prepared to cap its claim against the Claimant at £550,000).

The basis of the Employment Tribunal’s costs order (subsequently upheld by the Employment Appeals Tribunal) – was that the claims had no reasonable prospect of success and that the claimant knew (or ought reasonably to have known) that.  The Claimant unreasonably conducted the claim by deliberately giving misleading and/or untrue evidence in relation to the central issues in the case. The Claimant behaved unreasonably in continuing with his claims after he received a costs warning letter from the employer (which he did not respond to).

Our experienced team of lawyers are finding success for employers in securing early withdrawals of claims without payment of compensation. This can prove an extremely satisfying outcome to those employers who back their managers to make key people decisions in the workplace.