Costs awards in the employment tribunal

In contrast to cases in the civil courts, where the successful party is normally awarded costs, costs orders in employment tribunals have in the past tended to be relatively unusual. However, employment tribunals do have the power to award costs, and the frequency of costs orders has increased in recent years. This article outlines the circumstances under which an employment tribunal may order that costs are payable and considers an interesting recent case in which the Employment Appeal Tribunal ruled that a costs order should be made.

Costs orders in the employment tribunal

The tribunal has the discretion to make an order that requires one party to make a payment in respect of the costs incurred by the other party (in limited circumstances, a tribunal must make such an order). The tribunal may make a costs order for a fixed sum of up to £10,000 or order that costs be subject to a detailed assessment by a county court, in which case costs awarded may exceed £10,000. The tribunal may exercise its discretion to make a costs order in a number of circumstances. For example, the tribunal has a discretion to order costs where it is of the opinion that the party (in bringing the proceedings) or the party or their representative (in conducting proceedings) has acted vexatiously, abusively, disruptively or otherwise unreasonably, or that the bringing or conducting of proceedings has been misconceived and the tribunal considers that it would be appropriate for the paying party to pay costs to the receiving party in those circumstances.

A claim may be regarded as “vexatious” if, for example, it is brought by an employee simply to spite his or her employer. Similarly, a claim may be regarded as “misconceived” if it has no reasonable prospect of success. As regards what is “unreasonable” conduct, tribunals have a wide discretion in determining whether this test has been met. There is, for example, no requirement for the tribunal to identify a link between the conduct of the paying party and any costs actually incurred by the receiving party.

In a recent case, the Employment Appeal Tribunal overturned an employment tribunal’s decision not to award costs against the claimant employee. The case illustrates the relatively broad scope of the tribunal’s discretion in awarding costs and indicates that there may be circumstances under which it would be inappropriate for a tribunal not to make such an award.

EAT decision

In February 2009, the Employment Appeal Tribunal considered an appeal by an employer against an employment tribunal’s decision not to award the employer costs against the employee in relation to the employee’s race discrimination claim. The employment tribunal had rejected the employee’s discrimination claim and had found, as a fact, that the employee had not, as she had alleged, been subject to an offensive racist comment by her manager. This allegation had formed a central part of the employee’s case. Despite this finding, the tribunal declined to make a costs order on the basis that it did not believe that the employee had acted unreasonably in bringing or conducting the proceedings.

The Employment Appeal Tribunal disagreed with the tribunal’s conclusion. It held that the finding of the tribunal in relation to the alleged racist abuse necessarily involved a finding that the employee’s evidence on this point amounted to “a deliberate and, to an extent, cynical lie”. In these circumstances, it held that it was “perverse” for the tribunal to fail to conclude that the making of such a false allegation did not constitute unreasonable conduct. It followed, the Employment Appeal Tribunal concluded, that a tribunal applying itself to these facts must have come to the conclusion that the employee had acted unreasonably in bringing and conducting the proceedings and that the tribunal was wrong in law in rejecting the claim for costs on that basis.

This case serves as a timely reminder for anyone contemplating or involved in tribunal proceedings that any deliberate attempt to mislead the tribunal is very likely to result in costs being awarded against them.