Employment Law Explained

Costs in Employment Tribunals

At first glance this might not seem the most exciting topic, but bear with me as the recently reported Employment Appeal Tribunal (EAT) case of Daleside Nursing Home v Mrs Mathews has thrown up a very interesting point about when costs might be awarded against the losing party before an Employment Tribunal (ET).

The usual rule is that ETs don’t award costs against the losing party, unlike in the High or County Court where that is the starting point (although even in those venues this rule is subject to several caveats but that is another story).  ETs have the power to award costs, it is just that they don’t do it very often.   The Employment Tribunals (Constitution and Rules of Procedure) Regulations 2004 provide that power. In particular Regulations 38 – 48 set out the costs regime. 

Reg. 40(2) provides that an ET may order costs against the paying party if it considers that that party has acted unreasonably either in the bringing or the conduct of the proceedings.  Reg. 41 limits the costs that an ET can award to a maximum of £10,000, although if the case is sent to the County Court for detailed assessment more can be awarded.  The ET also can have regard to the paying party’s ability to pay an award for costs, so if a party has behaved badly in bringing the case in the first place or in the way they progressed the case but they don’t look like they’re worth the money, an ET doesn’t have to award costs against them.  Contrast this with the Courts where no such power exists unless the paying party is legally aided, in which case the court will make an order for costs but stipulate that it is not to be enforced without leave. 

The Daleside case is interesting because it was an appeal by the employer from the refusal of the Liverpool ET to award costs against the employee where she had claimed direct race discrimination.  In particular she had alleged that her line manager had called her a “black bitch”, although the ET found that that comment had not been made. The reasons they cited were that Mrs Mathews waited for almost three weeks after the comment was made before complaining about it and just before she was about to face disciplinary proceedings.  The ET took the view that the alleged comment was a “cynical lie” on the part of the employee.  Mrs Mathews subsequently lost.  The employer sought an order for costs but the ET refused to make one so the case proceeded to the EAT on that one point.

Not surprisingly, the EAT held that an order for costs should have been made given that the disputed comment was at the heart of the case for racial discrimination.  The Judgment  at para. 20 states

In our judgment, in a case such as this, where there is such a clear cut finding that the central allegation of racial abuse was a lie, it is perverse for the Tribunal to fail to conclude that the making of such a false allegation at the heart of the claim does not constitute a person acting unreasonably.”

The EAT then sent the case back to the ET for consideration of how much should actually be awarded against Mrs Mathews.  Interestingly, at para 3 the judgment states that the EAT was not seeking to lay down “any more general statement of legal principle”.  That remains to be seen as I suspect this case is now going to be quoted by both employers and employees ad nauseam  in any case where there is a dispute on the facts (ie most cases!).