Employment Tribunals – Fees, Costs and Frivolous Claims
11th May 2018
Employment Tribunal: Background and Cost Orders
It is old news that in R (on the application of UNISON) v Lord Chancellor  the Supreme Court held that the regime of case filing fees for claims brought in the Employment Tribunal was unconstitutional. Generally, comment has regarded this as a success for access to justice.
Employees with meritocratic claims should not be deterred from bringing them because of a fee structure like that which has now been overhauled and which required upfront payments of (generally) between £390 and £1,200. Nonetheless, employees should not be provided with an incentive to bring frivolous claims and to “bet the company” in the hope of receiving an undeserved pay-out. Regretfully, this is arguably the current reality.
An up front fee regime was always inappropriate and statistics released since the Supreme Court’s decision in 2017 do suggest the fees as they were applied were a barrier to access to justice for individual claimants. However, we frequently act for employers and have seen that the tools available to them to fend off entirely false and opportunistic claims are inadequate.
Options when faced with a frivolous claim
1) Costs Orders
The successful party to proceedings before the Employment Tribunal does not have an automatic right to recover their legal costs from the unsuccessful party as they do in the civil courts. This is often surprising to those of our clients who have not been involved in Employment Tribunal proceedings before. A party may apply for a costs order where the unsuccessful party’s conduct has been unreasonable. This would include pursuing a baseless claim. Sadly, Employment Tribunal judges consistently demonstrate a reluctance to make such orders and when they do their scopes varies quite unpredictably between roughly 20-80% of the costs incurred.
2) Strike Out Applications
A party to proceedings may apply to strike out the other party’s case on a number of grounds. These grounds are set out in Rule 37(1) of the Employment Tribunal Rules of Procedure 2013 (as amended) (the “Procedure Rules”). The most common grounds relied on are that the claim has no reasonable prospect of success and/or that the claim or response is scandalous or vexatious. Just as is the case regarding applications for costs orders set out above strike out applications are rarely successful. This is even more so when the claim includes whistleblowing or discrimination elements because it is established law that in such cases the Employment Tribunal should be extremely slow to award a strikeout.
3) Deposit Orders
Another option for a party to proceedings is to apply for a deposit order under Rule 39(1) of the Procedure Rules. These are granted more often than cost orders or strikes outs by Employment Judges but cannot be considered frequent. Furthermore, albeit the award may signal an Employment Judge’s lack of confidence in a claim, the effectiveness of deposit orders are hamstrung by the £1,000 limit on what an Employment Judge can order is paid into the Employment Tribunal.
Meaning for employer respondents
In our experience, the combination of the above often leaves employers in a difficult position. Given the unlikelihood of recovering their costs or successfully striking out a claim, an employer is faced with the prospect of incurring significant legal fees (particularly during the disclosure process). In light of this, it is easy to see why an employer may consider that it is best to cut their losses and offer a pay-out even where they know the claims levelled against them to be falsified.
It is certainly correct to recognise the asymmetrical power structures between employers and employees. However, perhaps it is time to rethink the infrastructure of Employment Tribunals to ensure that employers too are also provided with access to justice and not encouraged to settle false claims. A system which can easily be used to strong-arm employers into making unjustified pay-outs surely cannot be desirable from a legal or policy perspective.
Our view is that the Supreme Court’s decision was correct. However, without encouraging Employment Judges to utilise the powers available to them to dissuade litigants from putting employers to costs in the hope of extracting a pay-out the system does seem loaded in favour of potential opportunist claimants. This is no fault of the Supreme Court’s. It is not their duty to legislate for a supplementary structure following their effective abolition of Employment Tribunal filing fees. Instead, we suggest that in light of the Supreme Court’s decision Parliament should consult on the issues set out in this bulletin. Our expectation is that our observations would be shared.
It may be time to reconsider the position that the unsuccessful party does not have to meet any of the successful party’s costs unless the successful party makes a successful costs application. Perhaps any such rule will need to be a diluted version of the same rule in the civil courts. Maybe this could be in a rule that costs will follow the claim in an amount that the Employment Judge considers just having regard to all the facts of the case, including the strength of the evidence.
One way or another, the Employment Tribunal system and the practices within it may benefit from a recalibration so that access to justice is preserved for both the employee and the employer.
Our employment department has experience and expertise in all of the above areas.
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