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Costs Awards in Employment Tribunals

Meredith Hurst Monday, June 17, 2013

Costs awards in Employment Tribunals remain the exception rather than the rule. However, a recent Employment Appeal Tribunal judgment shows that even extremely high costs awards may be made in suitable cases. In Vaughan v London Borough of Lewisham a costs award of £87,000 against an unsuccessful Claimant was upheld even though the Claimant was unrepresented and there had been no costs warning or a deposit order. Furthermore the fact that the Claimant was unemployed did not invalidate the award.

However, the question of when costs should be awarded and the amount of those costs does remain somewhat unclear, as another recent EAT decision shows. In Howman v Queen Elizabeth Hospital the EAT found that an Employment Tribunal erred in law in awarding costs of £43,076 against an unsuccessful Claimant, despite the Tribunal finding that the Claimant must have known that his case "never had a chance of success". The Tribunal ordered the Claimant to pay his former employer's costs on an indemnity basis, meaning that it was for the Claimant to show that the costs were unreasonable if he wished to challenge the amount of costs. The EAT held that costs awards were exceptional, and for costs to be awarded on an indemnity basis must mean that the case was even more exceptional than the exceptional cases in which it was appropriate to make a costs order. The Employment Tribunal had not considered this when making the costs order. Furthermore the EAT held that the Tribunal had erred in not considering the impact on the Claimant of his losing his house or the impact of the costs award on his family.

Both these recent cases indicate that costs awards are a difficult area, in that it is difficult to predict whether a case is or will be one which an Employment Tribunal holds is suitable for a costs award to be made.

Although the threat of a costs award may be of tactical assistance to employers in defending Employment Tribunal claims it is possible that the introduction of Employment Tribunal fees from 29 July 2013 will have more impact in deterring claims, particularly those where the employee knows that their case lacks merits. However, any impact on unmeritorious claims may be affected by the fact that there will be fee remission based on means. Ultimately only time will tell if the introduction of Tribunal fees has any significant impact on the number of claims presented to Employment Tribunals.

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