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!).

11 Responses to Costs in Employment Tribunals

  1. This is one of those cases which seems superficially sensible but opens up cans of worms that are too hideous to contemplate. Firstly, the basis for the conclusion that the claimant lied seems particularly flimsy based, as it is, on the fact that she did not raise a complaint about it earlier. We have no idea how confident the tribunal was in making this particular finding and, given that it did not award costs, we could reasonably conclude that it was unsure.

    Secondly, the EAT does not address any of the key questions that flow from its approach. For example, what is a tribunal to do in a case such as Villalba v Merrill Lynch, where the claim failed but it was found that four respondent witnesses lied about a key issue central to the case? Should it award costs in favour of an unsuccessful claimant and if not, why not? This is not answered.

  2. michaelscutt says:

    James

    Good to hear from you and thanks for the comment – as you say it is a can of worms about to be opened. The only point I would make in response is that Liverpool ET itself came to the conclusion that the allegation was a “cynical lie”, so they must have had a pretty strong view of the Claimant’s mal fides. In the circumstances I’m not surprised that the EAT took their failure to award costs against the Claimant as being perverse.

    Have you had any direct experience of this situation where costs haven’t been awarded?

  3. What the tribunal said was, ‘If the claimant had been called “a black bitch” she would not have waited for nearly three weeks to raise the issue and done so only because it looked as though she herself might be taken through a disciplinary process.’ It made no expicit reference to a ‘cynical lie’ and this was an inference drawn by the EAT.

    It is well-known by practioners that, if a tribunal says that a party lied, this is an invitation to appy for costs. However, equally, I have seen many cases where the tribunal will allude to dishonesty but will not spell at out because it has taken the view that it is not serious enough to merit an award of costs. I have noticed that, since this decision, some tribunals now take great pains to emphasise the fact that a claim was brought in good faith because they are afraid of their decision on costs being overturned but this cannot be right. The presumption should be that costs will not be awarded and it is for tribunals to justify any decision to award costs, rather than the other way round.

    I have also seen plenty of cases where it is obvious to everyone that one of the parties is lying but nothing is said about it in the judgment. I am all for upholding the importance of the oath but, if this is to be taken seriously, tribunals should be willing to criticise those who abuse it, even where they deserve to win the case for other reasons. However, awarding costs would be inappropriate in these situations. The discretion of tribunals should be unfettered.

  4. michaelscutt says:

    Paragraph 25 of the ET’s judgment said;

    “We looked at all the surrounding circumstances and the background to this case and preferred Miss Rankin’s evidence over Mrs Mathew’s evidence. If the claimant had been called “a black bitch” she would not have waited for nearly three weeks to raise the issue and done so only because it looked as though she herself might be taken through a disciplinary process. She raised the issue on 6 June 2007 when she was resigning. Such a phrase is so offensive it is incomprehensible that she would not have made her objection much sooner. Mrs Mathew had no explanation for the delay.” (my emphasis)

    ETs have the power to impose costs on any party before them; they just that they seem reluctant to use that power. Given your experience would you not welcome that?

  5. What I would be fascinated to know is how the ‘loser pays costs’ rule in the civil courts arose. I am beginning to wonder if it came from an unreasonableness approach similar to that in the Employment Tribunals because it seems to me that this is where it inevitably leads. I would not necessarily object to this – arguably it could promote access to justice by making no win no fee easier to fund – but what I definitely do not want is a messy and inconsistent fudge between a no costs and a full costs regime. Even worse, I do not want a system where lying claimants pay costs but lying respondents get away scott free.

    One final point – because I have seen this a few times – what happens if both parties are lying? If they had to pay each other’s costs, it would not only discourage lying, it would also encourage them to keep costs to a reasonable level!

  6. michaelscutt says:

    Agreed. I too don’t know how the loser pays rule arose – the asnwer is no doubt in the depths of history. What we don’t want to see is a huge amount of satellite litigation on the subject of costs as there has been over the years in the civil courts on various issues – such as with CFAs.

  7. Dennis Ward says:

    A recent case at the Ashford Tribunal resulted in a unanimous decision in favour of the claimant. the Respondent Company broke all the rules but was only ordered to pay an extra 3 weeks redundancy payment the Claimant was refused anything other than the days travelling costs. What a joke after waiting for 8 months for the case to be heard. Why can the claimant not claim damages for the wrongfull dissmissal? Is there any appeal? any one able to help.

  8. Michael Scutt says:

    Dennis

    Thanks. I can’t comment on the issues in this case as I’ve not been involved in anyway. As a general point though, an appeal from the ET to the Employment Appeal Tribunal can be made, on a point of law usually, and must be made within 42 days of the written decision from the ET being received by the Claimant. It is possible to challenge the ET’s decision if it was thought the ET was baised or the decision perverse in some way but that is quite a challenge. The Claimant needs to seek specific legal advice on the options open to them.

    The Claimant is welcome to contact me directly on 0207 464 8433 or via email at michaelscutt@dalelangley.co.uk

  9. Cannot say on going case says:

    I am a frantic employer facing a vexatious claim, (I would say that wouldn’t I)
    It has the potential to ruin our business and destroy 20 years of very hard work along with 120 jobs that have been created as a result of that hard work.
    I conducted our response as best I could by myself because of lack of available funds and a fight for life during a recession, however it got beyond me and I had to engage a legal team.

    I accept that if the law finds us wanting then the responsibility for the loss of the business lies on my shoulders, but if the claimant fails then they should shoulder the same responsibility and pay costs that I cannot afford to loose.

    Pay up to make them go away? not a chance, that is theft!

  10. Cannot Sat As Well !! says:

    We are in the same situation as ‘Cannot Say ‘, we are going through the Tribunal process and if found against will be forced to shut down. Briefly: Dismissal of an employeee of 6 weeks resulted in her saying she was dismissed because she was pregnant even though she had not told anyone about the pregnancy !! It is usual for an Employment Tribunal to rule in favour of the Claimant in this scenario, it almost seems pointless attending the Tribunal hearing, we know the results nefore it happens. Why is Britsh Law so anti-employer ??

  11. Michael Scutt says:

    I can’t really comment on this and it wouldn’t be appropriate to do so on here if there is a claim underway at an ET. I don’t particularly agree with you that British law is anti-employer. It may seem that way, but discrimination claims can be very difficult to win for Claimants. The problem for employers is that you normally can’t recover your legal costs (never mind all the management time you lose) from the Claimant even if you win the claim and that is a big drain, especially on small businesses. All I can suggest is that if you haven’t done so you need to take legal advice.

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