Jobsworth by Michael Scutt » Practice & Procedure

Leaving your job? Three things not to do before you get your P45

Michael Scutt — Tue, 22 Jun 2010 09:30:29 +0000

For an employee who has decided to move on to pastures new and has handed in his/her notice, or has been told they are to be made redundant, there are certain pitfalls to be avoided. They may seem obvious (like serving notice), but people still fall foul of them. Walking out there and then is a big step for an employee – we’re in constructive dismissal territory here and legal advice should be taken before you do it. In other cases some employees only have regard to the restrictive covenants in their contracts of employment (which are the clauses that say the departing employee won’t try to solicit work or custom from the clients he’s been dealing with, or prevent him from joining a competing business once he’s left). Whether those restrictions are always legally enforceable is another matter and constitute another material for another blog post or three, but in this post I want to highlight for employees that trying to get ahead by taking confidential information, or by acting inappropriately whilst stil an employee (even if on garden leave) could end in tears.

The basic common law position is that all employees owe a “duty of fidelity” to their employers whilst they remain employed and to breach it may be a serious matter, even justifying dismissal for gross misconduct. This comprises several specific duties but the three main ones are ;

Duty of Confidentiality – It sometimes happens that when an employee is thinking of leaving their job they take some liberties with the employer’s confidential information, such as downloading the client database or copying confidential information. Don’t do it: every employee owes his/her employer a duty of confidentiality, which may be expressly stated in the contract of employment/staff handbook or implied under common law
Duty not to Compete - Don’t start working for another business, whilst still employed by current employer. This situation should not be confused with restrictive covenants preventing the employee from dealing with or working for a competitor for a period of time after the employment has terminated. Restrictive covenants can be difficult to enforce and will only be enforceable so long as they seek to protect an employer’s legitimate economic interests because the courts view them as being a restraint of trade. However, before the employee actually takes his leave he should not be competing with his employer. That is a breach of the duty of fidelity and, if the person concerned is a senior employee or a statutory director of the business concerned it may be a breach of fiduciary duty (“utmost good faith”). That will be a disciplinary matter and, almost certainly, gross misconduct, leading to dismissal without notice pay and, quite possibly, a reference. The above all applies even when the employee is on garden leave. They’re still an employee even if they’re not attending the workplace or doing any work.
Duty not to Act against the employer’s best interests – ie not to act in Conflict of interest - not whilst still employed. The duty of fidelity requires the employee not to act in a way that damages the employer and, furthermore, requires the employee to notify the employer of his (and other employees’) wrongdoing. There is also a duty to report approaches from competitors.

How can an employer protect themselves? The answer, as ever, is to have a properly (and professionally) drafted contract of employment that expands upon the various duties above and makes it quite clear what employees can and can’t do during employment.

So, this is all fairly straightforward, but can an employee prepare to compete? In other words can an employee take steps whilst in employment to prepare his own business when he leaves? Is buying an off the shelf company a breach of the duty of fidelity, or having stationery printed? It has always been the case that an employee can prepare to compete, but the recent case of Shepherds Investments Ltd v Walters [2006] EWHC 836 suggests that might not be quite so straightforward now.

I’ll deal with that in my next post.

Leaving your job? Three things not to do before you get your P45 originally appeared on Jobsworth by Michael Scutt on 22/06/2010.

How to Deter a Serial Litigant

Michael Scutt — Wed, 16 Jun 2010 12:41:23 +0000

Cereal Litigants?

There’s no need to resort to garlic, holy water, crucifixes, or rosary beads to keep them away (we’re not quite in Bram Stoker territory yet) but there’s no doubt that serial litigants are a blot on the ET landscape.

Following on from my previous posts on the subject, there was some good news a few weeks back in the EAT on the issue of what a claimant has to prove to succeed with a claim for age discrimination. The case of Keane v Investigo & others UKEAT/0389/09/SM, commented upon by Gordon Turner and Damian McCarthy in ELA Briefing last month[1], held that a claimant has to prove a genuine interest in performing the job advertised. There can be no detriment to an unsuccessful applicant if they had no interest in doing the job in the first place.

This decision may make it easier for employers to get these types of claim struck out. It will be necessary though to demonstrate that the Claimant has no genuine interest in the job and has a history of other unmeritorious claims because the ET is not quick to strike out. Factors to consider might include whether they had made applications for similar jobs, where the jobs were based, did the claimant have any background in that area as well as whether they are suitably qualified for the job and did they follow their application up or did they just rush off to the ET as soon as they were turned down. Serial litigants won’t go away, but they may well find their business model has just suffered a big dent.

Gordon Turner tells me that the Early Day Motion in Parliament, called before the election, criticising his Serial Litigants website, did not get enough support. It is to be hoped that the new government might take a fresh look at the whole serial litigants issue and consider what practical steps can be taken to stamp this abuse out.

[1] ELA BriefingVol 17 No 4 May 2010 Turner & McCarthy

How to Deter a Serial Litigant originally appeared on Jobsworth by Michael Scutt on 16/06/2010.

What does “Without Prejudice” mean?

Michael Scutt — Fri, 04 Jun 2010 09:00:21 +0000

I'm not trying to be a "cool grandad", really I'm not

If you have ever had to sue someone else and gone through the courts or Employment Tribunal, or if you have been asked to sign a compromise agreement upon the termination of your employment, it’s pretty likely that at some point the words “without prejudice” will have cropped up, followed (perhaps) by “subject to contract”. They can be baffling and many clients ask me what “without prejudice” means when I’m taking them through a compromise agreement. One client once asked me to write a letter to the other side “with prejudice”. Many people, lawyers and non-lawyers alike, write the words “without prejudice” on all their correspondence in the hope (presumably) that they will act as some kind of Harry Potteresque invisibility cloak to stop their words being thrown back at them in court. It doesn’t always work.

What does it mean?

Basically it’s a mechanism that allows one party in a dispute to put an offer of settlement to the opponent without risk that that offer will be used in court against them as evidence that they were liable for the dispute all along. It only applies provided that the offer is a genuine attempt to settle a dispute of a legal nature or litigation. The words “without prejudice” act as a shield to allow “behind the scenes” negotiating and is a form of what lawyers call “privilege” (meaning privileged from publication).

It’s a doctrine that’s as old as the hills, but crops up in the law reports fairly regularly as one party or another to a dispute tries to widen or narrow the scope of the rule. The recent case of Woodward v Santander [2010] UKEAT 0250_09_2505 was a case in point and provided a reminder that it won’t protect all communications hiding behind it. Without Prejudice won’t cover up acts of “unambiguous impropriety”, which would include acts of blackmail or perjury and Woodward confirms that is still good law, albeit the “unambiguous impropriety” has to be pretty clear cut. Woodward was a case based on discrimination and Mrs Woodward had sought to argue that the unambiguous impropriety exception should cover discrimination. The EAT rejected that.

“Subject to Contract” is a similar type of provision, most often cropping up in property or other transactions, to ensure that neither party will be bound by the terms of the draft contract until it has been signed by all the parties and is only then legally binding.

Here endeth the lesson …

What does “Without Prejudice” mean? originally appeared on Jobsworth by Michael Scutt on 04/06/2010.

Do Employees Have it All Their Own Way?

Michael Scutt — Mon, 26 Apr 2010 14:12:37 +0000

How not to Resolve a Dispute or Why Employees should never try to wear traffic cones

(picture right) How Not to Resolve Disputes or Why Employees Should Never Wear Traffic Cones

I’ve had this question (or more usually) statement put to me a few times just recently, most recently in a comment on this blog and the second by a delegate at a talk I gave at the City Business Library last Friday. Both were employers that thought UK employment law gives employees too many rights and opportunities to sue employers already burdened with a vast number of rules and regulations. In one obvious sense they are correct: employees have a vast number of rights of action available to them, from asserting a statutory right, via anti-discrimination legislation, equal pay, unfair dismissal and unlawful deduction of wages, to whistleblowing. The concept of unfair dismissal only dates back to 1971 and employment law is very much a young upstart in English law compared to most other types of work. Also, the number of claims brought at Employment Tribunals has increased year on year (save for last year where there was a 20% decrease in the number of claims lodged at the ET – click here to go to the ET’s statistics report *)

Since 2004, when the government introduced statutory disciplinary and grievance procedures intended to promote dispute resolution between employers and employee internally, the number of claims being commenced at the ET has increased dramatically. However, is it right to say that employees have everything their own way and that employers no longer have the freedom to manage?

There is no “costs-shifting” jurisdiction as of right in the ET. In other words the winner doesn’t automatically get his legal costs paid by the loser. A Claimant also does not need to pay a fee to the ET to commence his claim; the form can be filled out online and submitted easily. No wonder employers feel the balance has shifted too far towards the employee. But look at it from the point of view of the employee. Although they may have the right to, for example, request flexible working, comparatively few do. Many also complain of work situations where they want to claim constructive dismissal, but few do because of the risk of resigning without a job to go to. Further, every employee is under a duty to mitigate their financial losses, so if they do make a claim and also obtain an alternative job they will cut down what they might recover from the Tribunal if they win. And that is another big issue and, as the statistics show, most don’t win at Tribunal.

The main and justifiable complaint by employers is that employees can issue a claim, lead the employer into expense of time and legal costs and force the employer to settle the claim before it goes too far, in order to avoid costs getting out of hand. The availability of no win no fee agreements means that employees can mount claims that perhaps they would not have been able to do in the days when they would be paying a traditional retainer fee. In some cases, as I’ve discussed in previous posts on serial litigants, some unscrupulous people can make money from making repeated ET applications in the hope that the defendant business will pay up early to avoid the publicity or ongoing legal costs. Whilst those type of claims may be a small minority, you have to weigh the cost of preventing those claims against the need for access to justice and allowing employees with a genuine complaint to be able to bring their claims.

* That 20% figure may be artificially exaggerated because of the effect of 10,000 airline cases brought under the Working Time Regulations. The report itself notes that the real decrease, ignoring these claims, may be a decrease of 4%. The ET statistics also state that only 13% of the claims submitted were successful at Tribunal (i.e. the Claimant won), 33% were withdrawn (presumably because the employee was advised that they did not have reasonable prospects of success) and 32% were conciliated by ACAS. In other words, employees may have many potential rights of action available to them, but less than half actually obtain any benefit from the claims (I say this on the assumption that all of those conciliated by ACAS led to some form of financial settlement for the Claimant: in most but not all cases this will be so).

Do Employees Have it All Their Own Way? originally appeared on Jobsworth by Michael Scutt on 26/04/2010.

Why Employers need a Social Media Policy

Michael Scutt — Tue, 26 Jan 2010 10:00:06 +0000

Everyone is talking about social media these days and no longer is it confined to the purely social. Many businesses are using it to promote themselves; good heavens, even lawyers are getting into it. But use of sites like Facebook, My Space, You Tube and micro-blogging sites like Twitter present multiple challenges to employers.

There have also been well publicised examples of employees being caught out by their status updates on Facebook – like the woman who complained that she hated her boss and called him a pervert, forgetting that he was one of her “friends” on Facebook. He read the comments and a beautiful friendship was ended. Other employees have pulled “sickies” and posted that onto Facebook. Bad move. Not only will the boss probably get to hear about it, the employee will become the laughing stock of the internet as millions of people all over the world receive the news of the indiscretion via round-robin emails.

On one level employers may not be persuaded of the merits of Web 2.0 and the plethora of seemingly time-wasting opportunities that it provides. There is a great risk that staff could become inefficient and unproductive in surfing Facebook all day, or watching video clips on YouTube and that must be particularly galling for those employers who see no business application for these new technologies. The temptation might be to come down hard on employees but that may provoke claims for constructive dismissal or unfair dismissal. In an environment where for some people, surfing Facebook is as natural as reading a newspaper or a novel, an outright ban on accessing social media may be unreasonable.

For enlightened employers who do see the benefits of Twitter, YouTube, Facebook and the humble blog, the challenges are increased. Not only is there the risk that some employees will take advantage to spend time promoting themselves rather than the business, they may post inappropriate comments on the web and severely damage the reputation of the business. Worse still, the employer may end up on the wrong end of an action for defamation. No longer is it enough just to have a policy covering access to websites and use of email (and don’t forget to include mobile phones and Blackberrys/iPhones in those policies).

In my view, employers face three challenges;

Excessive use of social media leading to loss of productivity

2. Risk of reputational damage/unwanted litigation to the business

3. Avoiding inappropriate use/abuse of social media without upsetting employment relations

Employers need to develop a strategy for use of social media in their business. This should not only cover how the business intends to exploit web 2.0 for its own purposes, but also a policy governing how employees should use it, again not just for business purposes but also for private usage. Don’t forget that younger members of staff (“digital natives”) may be much more in tune with social media than older people. In order to avoid grievances or unwanted employment tribunal claims be consistent in applying the policy. As a solicitor who often advises employees, I frequently hear clients say that “Flossy was only given a written warning for the same thing” when they’ve been dismissed.

The policy needs to take account of how the business wants to exploit social media and a “one size fits all” model isn’t going to work. Instead the business needs to ask itself these sorts of questions;

Do we want to use social media to promote the business?
Who in the business will be responsible for using social media? Senior management or more junior staff?
What guidelines do we want to set them (these will probably need to be more specific for more junior staff)? The guidelines will need to go beyond banning obscene or discriminatory comments and give guidance on how the business wishes to be perceived in the wider-world.
How will usage be policed and what sanctions will be put in place for misuse or abuse?
Will usage of the company’s computers be allowed for private use of Facebook, Twitter, etc? If so, will usage be restricted to lunch-breaks or before/after work? A complete ban may be unenforceable or risks causing ill-feeling.

It’s not an exhaustive list and I would be pleased to hear from anyone with additional questions that ought to be added on.

To be successful, all users will need to be “on message”. In turn this may mean getting all users to “brainstorm” to devise the “voice” of the business. Social media offers massive potential for businesses to communicate their message, develop their identity and build their brand. Having a successful social media policy is at the heart of getting that right.

I would welcome your comments on any of the above and if I can assist further please contact me on 0207 464 8433 or at michaelscutt@dalelangley.co.uk

Why Employers need a Social Media Policy originally appeared on Jobsworth by Michael Scutt on 26/01/2010.

What lies ahead in 2010?

Michael Scutt — Wed, 06 Jan 2010 17:37:46 +0000

Wot, no snowman?

I’m not referring to the five inches of snow outside as I write this, and the inevitable disruption caused to roads and railways for the next week, but instead I am considering what the main statutory changes affecting employment law issues in 2010 will be.

January

Not much will happen this month while everyone looks in astonishment at their credit card bills, but just a reminder that the Vento guidelines on awards to be made in cases of injury to feelings in discrimination cases look to have been increased late last year in the case of Da’Bell v NSPCC. The Court of Appeal case in Vento v Chief Constable of West Yorkshire Police in 2002 set three main bands for ETs to consider when making awards for injury to feelings;

Lower – £500 – 5,000 – for one-off or isolated incidents

Mid - £5,000 – 15,000 – for more serious incidents but not of the most serious nature

Upper -£15,000 – 25,000 – for the worst examples of discriminatory behaviour, such as where there has been a campaign of bullying and harassment. Only exceptionally should awards be made in excess of the upper figure.

Since 2002 these bands have not changed. It is now anticipated that the new bands will be

Lower: £? – 6,000

Mid – £6,000 – 18,000

Upper – £18,000 – 30,000

For a fuller and very helpful discussion see Usefully Employed’s post on the subject.

February

This month will see something that hasn’t occurred before. The maximum compensatory award that can be made by an Employment Tribunal for unfair dismissal will actually decrease. The Employment Rights (Revision of Limits) Order 2009 states that the maximum award will decrease from its current £66,200 to £65,300 for all claims where the event giving rise to the claim occurred on or after 1^st February 2010. This is because the maximum amount is linked to the Retail Prices Index (RPI) and that fell by 1.4% in the year from 1^st September 2008.

The MINIMUM AWARD that can be made to an employee excluded/expelled from a Union and not re-admitted by the time the case reaches an ET falls from £7,300 to £7,200

The maximum guarantee payment to an employee under s.31(1) ERA 1996 decreases to £21.20 per day.

Each February also sees various other rates and limits amended – usually upward. This time though the maximum weekly award, used for Statutory Redundancy Pay purposes and calculating the Basic Award in Unfair Dismissal cases will remain at £380, but only because it was increased to that figure last October.

April – other notable increases, will be

Statutory Adoption }

Paternity } all increase from £123.06 to £124.88 per week

Maternity Pay }

Maternity Allowance }

But, Statutory Sick Pay (SSP) will remain unchanged at £79.15 p.w

This month will also see employees at employers with at least 250 employees acquire the right to request time off for studying or training relevant to the business. The right is simply to request time off NOT for the employer to fund the training.

Income Tax will rise to 50% for those earning more than £150,000 p.a

October

Legislative developments tend to occur in April and October now. In October it is expected that the Equality Bill will come into force to hopefully bring some order to the convoluted and confusing plethora of anti-discrimination laws currently on the statute book. It won’t just tackle discrimination in the employment arena, but will be wider ranging. Contractual provisions that prevent employees discussing their pay with workers are expected to be made illegal and the government will acquire the power to force privatre companies to disclose gender-pay details. More on all this in due course, assuming that it survives a change of government

Throughout the year there will be new cases being decided that will make the headlines, or appeals considering cases that caused a stir in 2009. I will cover these as they come up so please subscribe to the RSS feed or to the email updates for “breaking news”.

If you need advice on any employment law issues please call me on 0207 464 8433 or email me at michaelscutt@dalelangley.co.uk.

What lies ahead in 2010? originally appeared on Jobsworth by Michael Scutt on 06/01/2010.

What is a reasonable belief?

Michael Scutt — Thu, 26 Nov 2009 14:47:05 +0000

As Annabel Kaye of Irenicom points out in her very useful article on the subject on the The Grapevine online magazine the concept of reasonable belief crops up throughout employment law – particularly in dismissals. In the case of Taylor v Alidair CA 1978 ICR 445, CA Lord Denning got to the nub of the matter with his customary succinctness;

“Whenever a man is dismissed for incapacity or incompetence it is sufficient that the employer honestly believes on reasonable grounds that the man is incapable and incompetent. It is not necessary for the employer to prove that he is in fact incapable or incompetent”

Annabel’s article deals with how the employer can demonstrate reasonable belief and is well worth a read. The key issue is that an employer mustn’t act hastily, but after having carried out a thorough and fair investigation into the allegation.

If you need advice on this subject please contact me on 0207 464 8433 or at michaelscutt@dalelangley.co.uk

What is a reasonable belief? originally appeared on Jobsworth by Michael Scutt on 26/11/2009.

Latest News

Michael Scutt — Fri, 18 Sep 2009 13:54:17 +0000

Employers have to repay sick pay

Some good news for employees came out last week with the decision by the European Court of Justice in Pereda v Madrid Movilidad SA that says if an employee is sick whilst on holiday, they can retake the holiday later on or carry the days lost over to the next year.

Not surprisingly employers’ representatives are unhappy about it as it places additional burdens on them. It also increases the risk of unscrupulous employees taking advantage. No guidance is offered by the ECJ on how this could be policed. Employers can only insist on a sick note from GPs after seven days absence.

Costs Awards in Tribunal

A while ago I wrote about the case of Daleside Nursing Home v Mathew which dealt with the issue of when costs should be awarded against a party by an Employment Tribunal. A recent case has now followed that decision. In Dunedin Canmore Housing Association Limited v Donaldson, a case before the Employment Appeal Tribunal (EAT) in Edinburgh it was held that the Claimant (who was representing herself) had lied under oath and the Tribunal should have awarded costs against her. In particular the Honourable Lady Smith said;

The issue was not whether a lay person could reasonably have been expected to understand the law. It was whether she had or had not, in simple human terms, approached the essential factual matters that lay at the heart of her case honestly and reasonably. She had not done so and these are exactly the sort of circumstances where a Tribunal has a responsibility to make clear that it is quite unacceptable to cause expense to another party by bringing proceedings on that basis.

Be warned!

Notice Monies and Constructive Dismissal

Here is some good news for employers. The Court of Appeal (CA) has recently overturned the EAT’s decision in Stuart Peters v Bell which had said that an employee who claimed constructive dismissal from his employer and then went on to work for another employer during the notice period they would otherwise have served did not have to give credit for the monies earned. This has been the law, since 1972 case of Norton Tools v Tewson. Effectively the employee could get his salary twice for that period, which was something of a windfall for him. That has now been overturned by the CA, but only insofar as constructive dismissal cases are concerned. So, if an employee claims constructive dismissal, leaves the employer without serving their notice and finds alternative work elsewhere, the employer won’t have to pay the notice monies due to the employee during that period.

Norton Tools is still good law in other respects and hasn’t been completely overturned.

Please contact me on 0207 464 8433 or email me at michaelscutt@dalelangley.co.uk if you require further advice.

Latest News originally appeared on Jobsworth by Michael Scutt on 18/09/2009.

How (not) to sack someone

michaelscutt — Mon, 14 Sep 2009 08:00:37 +0000

As an employer, if you want to avoid your name appearing in the Metro or any of the other free papers, try to avoid sacking employees suffering from cancer by email. This is the moral from the recent report concerning Melinda Bolnar, a 27 year old teacher suffering from bowel cancer and who had just endured seven months of chemotherapy and given a 30% chance of survival. According to the report it is alleged that her private school sacked her by email. I should point out that the case is due to be heard at an Employment Tribunal later this year and the above report are merely the employee’s allegations against her employer and not the proven facts.

The report probably doesn’t give the whole story but it certainly gives the impression that Melinda was sacked without any form of disciplinary or capability procedure. If that genuinely is the case the school might find themselves in difficulty when the case does reach the ET.

So (assuming that is what happened) what should an employer do if it wants to terminate the employment of an employee suffering from long-term illness?

The first and most important question is why should the employer want to terminate the employee’s employment? This will be at the heart of any subsequent litigation that may arise. The usual answer given by employers is that they could not afford to keep the position empty whilst the employee was away or that temporary cover could not be extended indefinitely. Much will depend upon the role performed by the employee and the extent to which it is reasonable for the employer to reach the conclusion that dismissing the employee was reasonable in all the circumstances. The size and resources of the business will be important too. What action might be reasonable for a small employer to take will be greatly different from a multi-national PLC or, for example, the NHS. How the employer treated other staff in similar circumstances on other occasions will be relevant: what are the contractual sick pay provisions, if any?

There are only a limited number of grounds on which dismissing an employee will be fair. They include capability to do the job. This can mean lack of ability of the employee to fulfil their role (i.e. incompetence) or it could include inability to do the job through sickness. Problems can arise for an employer when the employee takes lots of short periods of time off sick (whether genuinely or otherwise) but when, as in the type of case under discussion here the employee is off for weeks or months.

A prudent employer will properly investigate the reasons for the employee being absent and will try and establish when they might return. This will need to be done with sensitivity and tact, which means good communications between employer-employee are going to be vital to make this work. It will probably need medical evidence to be obtained and a well-drafted contract of employment should include a clause which allows the employer to send the employee to a doctor of its own choosing. If the medical evidence suggests that the employee will be fit to return to work, even if on a gradually stepped basis at first, in a fairly short space of time, the business will need to think long and hard before dismissing. On the other hand, if the absence looks like being lengthy then the employer may be justified in bringing the employment relationship to an end, provided it does so on grounds of (in)capability.

Where difficulties arise (as in Melinda Bolnar’s case) is where the employee feels there are other grounds for dismissal. The Metro report states that she is suing for disability discrimination. Much will depend, as usual, on who said or did what and when. To avoid difficulties of this sort an employer needs to act clearly and openly about what it is doing and why.

It needs to follow a proper process, as laid down by the ACAS Code of Practice introduced this April. In brief this means the employer investigating properly, inviting the employee to a meeting to discuss the issues, allowing them to be accompanied by a work colleague or Trade Union representative and to make their point. Finally, the employee should be informed of their right to appeal the decision if it goes against them. If the employer gets it wrong they can not only face a claim for unfair dismissal (with the potential for the award to be increased by up to 25% if they are deemed to have acted unreasonably) but also a claim for disability discrimination. Claims under the DDA are not capped at the £66,200 maximum compensatory award, as with unfair dismissal cases.

Of course, all the above leaves aside the moral issue of whether it is the right step to take but and Courts/Tribunals don’t make judgments on moral grounds: the newspapers do that.

If you are an employer or employee requiring further advice on any of these issues, please get in touch with me at michaelscutt@dalelangley.co.uk or on 0207 464 8433

How (not) to sack someone originally appeared on Jobsworth by Michael Scutt on 14/09/2009.

Costs in Employment Tribunals

michaelscutt — Wed, 27 May 2009 08:00:23 +0000

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!).

Latest News

Costs in Employment Tribunals originally appeared on Jobsworth by Michael Scutt on 27/05/2009.