Background

In the Employment Tribunal (ET), the general rule is that legal costs are very rarely awarded against either party.

They can be awarded if a party or representative; “has acted vexatiously, abusively, disruptively or otherwise unreasonably in either the bringing of the proceedings (or part) or the way that the proceedings (or part) have been conducted“.

In a recent Employment Appeal Tribunal (EAT) decision, the EAT has upheld an ET decision that the employer (who was represented) pay the Claimant’s costs to the tune of £17,136.90. The case report can be read here.

Facts

Sunuva Limited (Sunuva) sells fashion swimwear. It employed Mrs M as International Sales Manager.  Sunuva decided it would make Mrs M redundant.  It was then advised it should undertake a selection process to include a selection pool and criteria.  The advice was followed. Mrs M was selected and made redundant.

Mrs M claimed unfair dismissal (and discrimination) on the basis the outcome was predetermined and the process a sham. Sunuva denied this and the matter proceeded to a final hearing.

During the hearing Sunuva’s main witness accepted that (as the ET put it) there was; “never any prospect of anyone other than the Claimant being selected for dismissal. It had been decided at the outset that she would be dismissed.”

ET Decision

On the back of the witness evidence, the ET decided the dismissal was unfair, but not discriminatory. The Claimant made a costs application seeking recovery of her legal fees of £25,705.36, which included costs incurred before Sunuva’s defence (ET3) had been received.  Sunuva’s representative did not argue that costs should be limited to work undertaken after receipt of the ET3, and so costs incurred prior to the ET3 submission were included.

Sunuva’s representative accepted that its client’s case has no reasonable prospects of success. The ET decided that the test for a cost award had been met and concluded that 2/3rds of the Claimant’s costs should be awarded where the discrimination claim failed, but only accounted for 1/3rd of the costs the Claimant incurred.

EAT Decision

Sunuva appealed, but the EAT found that there was nothing wrong or unlawful about the ET’s decision on costs. The appeal failed.

Conclusion

This case should give employers cause for concern.

Firstly, most employers will have an idea as to who may (or may not) be selected for redundancy, but this case highlights the need to take (and follow) proper advice beforehand and not pre-determine the outcome until those procedures have been followed.

Secondly, it increases the risk of costs being awarded if concessions are made by your key witnesses (and representative) that undermine your position or contradict your formal defence (ET3) and highlight that you should not have defended the claims.

Thirdly, the award included costs incurred before Sunuva had submitted its defence. The ET rules say that costs can only be awarded in “…the way that the proceedings…have been conducted…”, so to award costs before Sunuva had engaged in the ET process seems harsh and increases your exposure.

As always, expert advice, should be sought so you’re aware of the prospects of your defence and the likely exposure in terms of any potential compensation, legal fees and your time.

Clients should also consider the comfort of insurance to protect against Employment Tribunal claims – which we can offer – especially now that Tribunal fees have been abolished and Tribunal claims are reportedly increasing. Further, many of your staff will have insurance on their household policies, so if the employer has it also, it creates a level playing field in the litigation.

 

If you have any questions about this subject or any employment-related legal issues, please contact your dedicated employment law solicitor. Alternatively, please call us on 01483 411 533 and we would be delighted to assist you.