UK: Employers Begin To Fight Back

With the recent tide of employment legislation and a more litigation minded society employers now find themselves facing an increasing number of Employment Tribunal claims. Although the vast majority of these claims are brought out of a genuine sense of grievance, there are many that are completely without foundation.

Employees are spurred on by reports of the levels of compensation awarded in high profile cases and often have little to lose in submitting a claim to the Tribunal. No application fee is payable when a claim is commenced and there are plenty of lawyers and "employment consultants" who are willing to take on claims on a "no win no fee" basis.

Due to the cost and management time involved in defending such claims, they are often settled before a hearing even though if defended the employer would be successful. Even with the most defendable of claims, it frequently comes down to a commercial decision in that it often costs more to defend a claim than to settle it. Employees are well aware of this and some exploit this to their advantage.

However, the balance appears to be shifting. Tribunals appear to be recognising that employers need protecting against unmeritorious claims and are increasingly likely to use their powers to award costs.

The Employment Tribunals have had the power to award costs against an Applicant in certain circumstances for a number of years. However, since July 2001, they have had the power to award costs of up to £10,000 against an Applicant on the grounds that the claim has been brought or conducted vexatiously, abusively, disruptively or otherwise unreasonably or if the claim is misconceived. Costs in excess of £10,000 can be awarded if the matter is referred by the Tribunal to the County Court for a detailed assessment.

This power has, until recently, been rarely used, but Tribunals are starting to use it more often.

In one claim this firm handled recently a Tribunal ordered an Applicant to pay £10,000 costs to a Respondent on the basis that the Applicant acted unreasonably in bringing the complaint and that it was misconceived.

In another claim, which was listed for a costs hearing on the basis that the Applicant had failed to attend a Tribunal hearing, a settlement was reached at the door of the Tribunal whereby the Applicant agreed to pay his former employer over £3,500 in costs.

These are not isolated examples, the Tribunals are increasingly receptive to costs applications by employers, particularly where the employer has made it clear to the Applicant in writing prior to the hearing that it considers the claim to be without merit and has threatened an application for costs.

The Employment Bill, which is currently being debated in the House of Lords, makes provision for the balance to be addressed still further, allowing for the introduction of Regulations under which Tribunals would be able to make an award of costs directly against a party’s representative on the basis of the way they have conducted proceedings. This threat of costs may discourage representatives from taking on unmeritorious claims.

There is also a proposal that Regulations should be introduced allowing Tribunals to order one party to pay compensation to another party for the time they have spent preparing for the case where a party has behaved unreasonably.

Although costs awards are in practice still relatively rare, these developments signal a realisation by the Tribunals that not all applications are brought in good faith and that employers should be afforded the opportunity to fight back in appropriate cases.