One of the most persistent myths surrounding the Employment Tribunal system is the “loser pays” principle. Many people who contact us at Blackstone Solicitors initially assume that if they win their case against their employer, the Tribunal will automatically order the losing side to pay their legal fees. It is a logical assumption based on how civil court cases are often portrayed in the media. However, in the world of employment law across England and Wales, the reality is starkly different.
If you are currently preparing for a hearing or considering starting a claim, it is vital that you understand the financial risks involved from day one. In this article, we will explain the “no costs” rule that governs Employment Tribunals, the narrow exceptions where you might actually recover your costs, and the practical steps you can take to protect your position.
Free Initial Telephone Discussion
For a free initial discussion with a member of our New Enquiries Team, get in touch with us today. We are experienced in dealing with all the legal aspects of Employment Law, and once instructed, we will review your situation and discuss the options open to you in a clear and approachable manner. Early expert legal assistance can help ensure you are on the best possible footing from the start and also avoid the stress of dealing with these issues on your own. Simply call us on 0345 901 0445 or click here to make a free enquiry and a member of the team will get back to you.
The General Rule: The “No Costs” Jurisdiction
The Employment Tribunal is designed to be an accessible forum for resolving workplace disputes. To ensure that employees are not discouraged from bringing genuine claims out of fear that they might be financially ruined if they lose, the system operates as a “no costs” jurisdiction.
This means that, as a general principle, each party is responsible for their own legal costs, regardless of the outcome. Whether you win or lose, you typically pay your own solicitor fees. Similarly, your employer pays their own legal fees, even if they successfully defend the claim against them.
This rule is intended to prevent the cost of litigation from becoming a barrier to access to justice. However, it also means that even a successful claimant often walks away with a compensation award that has been eroded by the costs of paying for their own legal representation. It is a difficult reality, but it is one that every litigant must factor into their planning and budgeting before embarking on a claim.
When Can You Recover Your Legal Costs?
While the “no costs” rule is the starting point, it is not absolute. Under the Employment Tribunals Rules of Procedure 2013, the Tribunal has the discretion to make a costs order in specific circumstances. These are not intended to be a routine way to reimburse a winning party. Instead, they are punitive measures designed to discourage and punish bad behaviour.
The Tribunal may order one party to pay the costs of the other if they believe that the party has acted “vexatiously, abusively, disruptively or otherwise unreasonably” in the way they have conducted the proceedings.
Understanding the Key Terms
The legal threshold for these terms is high. A judge will not make a costs order simply because they think the employer acted unfairly at work. They are looking at how the employer behaved during the litigation process itself.
- Vexatious: This refers to bringing a claim or a defence that is purely designed to harass or annoy the other party, rather than to genuinely resolve a legal dispute. If an employer fabricates evidence or brings in dozens of irrelevant witnesses just to exhaust your resources, they may be acting vexatiously.
- Abusive: This involves conduct that goes beyond aggressive litigation. It includes things like using the tribunal process to intimidate you, making personal threats, or attempting to pervert the course of justice.
- Disruptive: This covers behaviour that actively prevents the Tribunal from functioning. Examples include failing to comply with court deadlines, refusing to disclose relevant documents, or constantly interrupting the hearing to prevent evidence from being heard.
- Unreasonable: This is the most common ground for a costs application. It does not mean the employer had a weak case. It means their conduct of the litigation was so far outside the bounds of what is expected that it warrants a penalty. For example, if an employer refuses to settle a case despite knowing their defence is completely devoid of any legal merit, a judge might view that refusal as unreasonable behaviour.
The “Preparation Costs” Order
If you are representing yourself and do not have a solicitor, you cannot claim for “legal fees.” However, you may be eligible to apply for a “preparation costs” order. This is a specific type of order that compensates a party for the time they spent preparing their case, such as gathering documents, writing statements, and researching law.
While it is not as comprehensive as recovering full legal fees, it does allow a claimant to be reimbursed for the significant personal time invested in a case. The criteria for obtaining preparation costs are the same as for legal costs: you must show that the other side acted unreasonably, vexatiously, or disruptively.
Wasted Costs Orders
There is another, distinct mechanism known as a “Wasted Costs Order.” This is slightly different because it is targeted specifically at the legal representatives rather than the party they represent.
If a solicitor or barrister acting for your employer has acted improperly, negligently, or unreasonably, and has caused you to incur unnecessary costs, you can apply for the order directly against them. This might happen if they have deliberately misled the Tribunal, failed to follow direct orders from a judge, or engaged in tactics that were designed to waste time and inflate the costs of the case. It is a powerful tool, but it is one that Tribunals use very sparingly.
Is There a Risk You Could Pay Their Costs?
Yes. It is critical to understand that the “no costs” rule applies to both parties. If the Tribunal believes that you have acted unreasonably, vexatiously, or disruptively, they can order you to pay your employer’s costs.
This is a risk that every claimant should take seriously. If your claim is completely hopeless, or if you bring it in bad faith with the intention of causing damage to your former employer’s reputation rather than seeking a fair resolution, you could find yourself with a significant legal bill. We always advise our clients to be brutally honest with themselves about the strength of their case before proceeding. If your case is weak, you should consider whether the risk of a costs order outweighs the potential gain.
How to Set Yourself Up for a Successful Costs Application
If you believe your employer is behaving badly during the litigation, do not wait until the final hearing to complain. You need to build a “trail of evidence” that will convince a judge that the employer’s conduct was unreasonable.
- Communicate in Writing
Whenever the employer’s solicitor acts unreasonably, respond in writing. For example, if they refuse to disclose a vital document, send a calm, professional email setting out why the document is relevant and requesting its immediate disclosure. If they continue to refuse, you have a written record of your attempts to resolve the issue constructively.
- Put Them on Notice
If you are confident that your case is strong and the employer’s defence is meritless, you can send them a “costs warning.” This is a letter stating that their conduct of the litigation is unreasonable and that, if they continue, you will be making an application for costs at the hearing. A well-drafted costs warning can sometimes focus the mind of an employer and lead to a more realistic settlement.
- Keep a Detailed Log
Start a diary of every instance where the employer or their legal team has been obstructive. Include dates, times, and specific descriptions of what happened. When you make your application for costs at the end of the hearing, this log will be your primary piece of evidence. Judges have a lot to manage, so the more organised and concise your evidence is, the more likely they are to engage with your application.
The Procedural Reality
Applying for costs is a formal process. It is not something you can just mention at the end of the day. You must apply for the order either during the hearing or shortly after the judgment is handed down. The Tribunal will then consider whether your application has merit. They may hold a separate hearing to decide the issue if the amount of money involved is substantial.
It is worth noting that judges are inherently reluctant to award costs. They are very sensitive to the fact that they do not want to discourage people from bringing genuine claims, even if those claims ultimately fail. Therefore, they will usually look for very clear, undeniable evidence of bad behaviour before they will hit an employer with a costs order.
Why Blackstone Solicitors Can Help
The rules surrounding costs and the litigation process are complex. When you are already dealing with the stress of a tribunal claim, adding the burden of fighting for costs can feel overwhelming.
At Blackstone Solicitors, we understand that you want more than just a win. You want to be protected from the costs of a process you never wanted to be part of. We can help you by:
- Conducting a Realistic Risk Assessment: Before you start, we will review the strength of your case and the potential risks, ensuring you have your eyes wide open to the financial reality.
- Strategic Litigation: We manage your claim in a way that minimizes the risk of a costs order against you and maximizes your chances of recovering your own costs if the employer behaves unreasonably.
- Drafting Costs Warnings: We know how to draft correspondence that puts pressure on the employer to settle without making you look unreasonable in the eyes of the Tribunal.
- Expert Representation: If the need arises to make a formal application for costs, we have the experience and the advocacy skills to present your case clearly and persuasively to the judge.
Final Thoughts
The Employment Tribunal is an imperfect system, but it is one that prioritizes access to justice over financial restitution for legal fees. The “no costs” rule is a double-edged sword. It protects you from the threat of paying your employer’s expensive legal bills if you lose, but it also means that winning a case does not always result in a full recovery of your own expenses.
However, do not let this discourage you. Justice is not just about the money; it is about accountability, and it is about ensuring that employers act in accordance with the law. If your employer is acting in bad faith, if they are playing games, and if they are wasting the Tribunal’s time, the law does provide a remedy.
If you are navigating a dispute and are concerned about the financial implications, reach out to the team at Blackstone Solicitors. We are here to guide you through the process, protect your interests, and ensure that your voice is heard. Let us take the stress of the legal process off your shoulders so you can focus on the next chapter of your career.
How to Contact Our Employment Law Solicitors
It is important for you to be well informed about the issues and possible implications of Employment Law. However, expert legal support is crucial in terms of ensuring a positive outcome to your case.
To speak to our Employment law solicitors today, simply call us on 0345 901 0445, or click here to make a free enquiry. We are well known across the country and can assist wherever you are based. We also have offices based in Cheshire and London.
Please visit our website to see all the Employment Law services we offer: https://blackstonesolicitorsltd.co.uk/employment-law-services/
Disclaimer: This article provides general information only and does not constitute legal advice on any individual circumstances.
Comments are closed.
