Costs in Employment Tribunal claims

Employment Tribunal claims can require a lot of time for preparation, and legal fees can be substantial if lawyers are involved.

Sometimes, one side in an Employment Tribunal claim will threaten to pursue the other for legal costs if they bring or continue with a claim.

Unlike civil courts, where the losing party usually pays the winning party’s costs, costs orders in the Employment Tribunal are rare – they are the exception rather than the rule. This means claimants and respondents cannot normally claim their legal costs, or the time spent in preparation, as part of compensation or as an outcome of the case in the Employment Tribunal.

Costs are awarded rarely, and typically only in cases of serious misconduct.

However, costs can, in exceptional cases, be awarded against you as a Claimant. The way in which you conduct your case, and the decisions you make about continuing with aspects of your case, can sometimes lead to you receiving an Order from the Tribunal to pay the respondent’s costs. It is important to think very carefully about any costs warning you receive, and to be aware of the Tribunal’s power to award costs.

The rules about costs in the Employment Tribunal are mainly contained in the Employment Tribunal Rules from Rule 73 onwards.

In summary, the following rules apply:

If in the opinion of the Tribunal –

• a party has acted vexatiously, abusively, disruptively or otherwise unreasonably, either in the bringing of the case, or in the way the case was conducted;
• if the claim or part of it (or the employer’s response) had no reasonable prospect of success;
• Where a party has been in breach of any Order or Practice Direction from the Tribunal; OR
• Where a hearing has been postponed or adjourned on the application of a party,
  
  – then costs may be awarded. 

Special rules also apply to costs in unfair dismissal cases around reinstatement and re-engagement.

The Tribunal will look at the test summarised above in deciding whether or not to award costs, and will apply its discretion. Generally speaking, the Tribunal will look at “all relevant factors” in deciding whether or not to award costs, including:

• the general position that costs in the Employment Tribunal are the exception rather than the rule;
• the extent to which a party acts under legal advice;
• the nature of the claim and the evidence; and
• the conduct of the parties.

The tribunal’s discretion to make a costs order means that even if they consider the grounds for making a costs order have been met, they do not have to make a costs order. The costs order would only be made if they considered it appropriate on all the relevant facts. For example, a tribunal should not judge someone representing themselves (known as a litigant in person) by the standards the tribunal would judge someone who is professionally represented. In addition, when deciding whether to make a costs order, and if so, how much of an order to make, the tribunal can explicitly consider the paying party’s ability to pay any such costs. This means the tribunal can take into account a claimant’s financial circumstances.

Costs orders are very much the exception rather than the rule. The basic principle is that one party will not be ordered to pay the costs of the other. To give a sense of how rare costs orders are, in 2019/2020, 49,998 claims were disposed of in the employment tribunals, but only 177 costs orders were made. 47 of these were in favour of the employee, and 130 in favour of the employer.

Employers will often threaten to apply for a costs order as a tactic for pushing a claimant to settle or drop their claim. It is important to understand that costs orders can be made, and the claimant should be careful in how they conduct their claim and carefully consider the merits of their claim, but it is also important to understand that costs orders are made in only a rarity of cases.

Conversely, if the respondent (your former employer) is threatening you with costs where you feel you are behaving reasonably in bringing your claim, you may be able to apply to the tribunal for a costs order against the respondent.

If your former employer is using the prospect of costs against you as a threat, despite there being no realistic chance of them being awarded, the Tribunal may consider this to be unreasonable conduct, potentially leading to a cost order against the employer.

In cases involving discrimination, this could also be viewed as victimisation, which is a stand alone discrimination claim in itself.

It is not considered vexatious or unreasonable for a claimant to pursue a claim with low prospects of success. However, it is vexatious and unreasonable for a party to make an unjustified threat of costs.

Sometimes there will be quite expensive legal fees in a case because a party is represented, and there may be several lawyers (possibly solicitors and barristers) advising on a matter. In such a case, the legal costs to that party may be in the thousands of pounds, and that party will want to try to recover some of those very high costs.

On the other hand, in some cases, neither side is represented by lawyers. However, this doesn’t mean that there can’t be any costs awarded.

So there are two different situations:

• Costs where there was representation: A Tribunal can make a “Costs Order” for legal fees and expenses (for example fees for an expert witness) paid by the winning party if they are legally represented or represented by a lay representative (someone who is not a legal representative but who charges for representing at tribunal).
• Costs where there was no representation:  If the winning party was not represented, the Tribunal can award a “Preparation Time Order” for the costs of the time taken to prepare the case (subject to specified hourly rates – £44 per hour for 6 April 2024 to 5 April 2025).

The Tribunal cannot award both a costs order and a preparation time order in the same case. If both types of orders are applied for, the Tribunal should decide on one type and may defer the decision to a later stage.

An Employment Tribunal can also order a party to make a payment to a witness who is required to attend the Tribunal for their expenses incurred in attending. (Evidence of such expenses would be required).

Generally speaking, a party may apply at any time up to 28 days after the date of the judgment on the relevant issue was sent to the parties.

The Tribunal should not make a Costs Order or Preparation Time Order unless the party being asked for costs has had ”a reasonable opportunity to make representations” in response to the application.

If a Costs Order or Preparation Time Order application is made against you, you should receive notice of this in writing. It is important to respond quickly, setting out why you think this would not be appropriate, with reference to the Tribunal Rules. You should point out if you are a litigant in person (unrepresented), and make it clear that you believe your conduct in the case was reasonable in the circumstances, or any other factors which may apply to your conduct in relation to the issue raised. In such a situation, it may be relevant to refer to Rule 2 of the Tribunal Rules (the “Overriding Objective”).

No. The Employment Tribunal can award up to £20,000 without a detailed assessment. For amounts over £20,000, a detailed assessment under the Civil Procedure Rules 1998 is required. In detailed assessments, the Tribunal can specify the costs related to particular parts of the proceedings or set a cap on the maximum amount.

There is a risk you will have to pay costs if you fail to comply with the Tribunal processes properly or behave in a vexatious, abusive or otherwise unreasonable way or are acting in bad faith. Taking the following into consideration will help with this:

• Always tell the truth: Misleading the Employment Tribunal can result in an order to pay costs.
• Behave sensibly: It is important to cooperate with the Employment Tribunal and carry out any directions given.
• Having a reasonable claim: Make sure there are grounds for and evidence to support your claim. Taking proper legal advice can help with this.
• Don’t hold anything back: Be sure not to withhold information from the Employment Tribunal.

The likelihood of you being ordered to pay costs is very low if your claim is a reasonable one and your behaviour has been reasonable at all times, even if you lose.

Mistakes, misunderstandings or other issues caused by a claimant’s anxiety, lack of experience, or legal knowledge are usually not enough to make them responsible for costs. A costs order typically requires more than just having a weak claim.

It cannot be ruled out that an Employment Tribunal will order some costs to be paid by you, though this is unusual.

Working Families has a separate page on Deposit Orders, Unless Orders and Strike Out in the Employment Tribunal.