Whether you are an employer defending a claim or a former employee pursuing one, the issue of costs in the Employment Tribunal is an important consideration. Many parties are surprised to learn that the tribunal operates differently from the civil courts when it comes to costs.
Unlike the civil courts, the Employment Tribunal is generally a cost-neutral forum. This means that each party is expected to bear their own legal costs, regardless of whether they win or lose. A successful party will not automatically recover their costs from the unsuccessful party. However, there are circumstances where the tribunal may exercise its discretion to make a cost award. Understanding these situations can help you manage risk and prepare effectively.
Types of cost awards
Cost Warning
A cost warning is not a formal order but a cautionary signal. It can arise in two ways:
- From the tribunal itself: The tribunal may warn a party that their case appears weak, misconceived, or lacking merit. The warning serves as notice that if the party continues and ultimately loses, they may face a costs order.
- From the opposing party’s representatives: A solicitor or barrister may issue a warning that they intend to apply for costs if the other side persists with a claim or defence that is unlikely to succeed.
Cost warnings are often accompanied by a draft schedule of costs, setting out the potential financial consequences. While not a prerequisite for a costs order, they are a practical tool to encourage settlement or withdrawal of weak claims.
Cost Order
A cost order is a formal direction requiring one party to pay the other’s costs. These may be awarded in situations such as:
- Breach of a tribunal order or practice direction.
- A hearing being postponed or adjourned due to one party’s actions.
- Conduct that is deemed unreasonable, vexatious, or abusive of the tribunal process.
- Where a claim or response is being pursued which has no reasonable prospect of success.
Because costs orders can be significant, it is vital to stay on top of deadlines, procedural requirements, and tribunal directions. Failure to comply can expose a party to unnecessary financial risk.
Preparation Time Order
A Preparation Time Order (PTO) is designed for parties who are not legally represented. Instead of covering legal fees, it compensates the unrepresented party for the time they have spent preparing their case.
Key points:
- The tribunal will award either a cost order or a preparation time order, but not both.
- PTOs are calculated based on a set hourly rate determined by tribunal rules, not on the actual time claimed.
- They are intended to level the playing field where one party has incurred significant preparation time without professional support.
Wasted Time Order
A Wasted Costs Order is rare and applies only to legal representatives. It may be made where a representative has acted improperly, unreasonably, or negligently.
This type of order is aimed at discouraging poor professional conduct and protecting parties from unnecessary expense caused by their representatives.
While the Employment Tribunal is designed to be accessible and cost-neutral, cost awards remain an important mechanism to deter unreasonable conduct and compensate parties where appropriate. Cost warnings, cost orders, preparation time orders, and wasted costs orders each serve distinct purposes.
For both employers and employees, the key takeaway is that costs are not automatic but can arise in specific circumstances. Understanding these rules helps you navigate tribunal proceedings with greater confidence and avoid unnecessary financial exposure.
If this is something that you need assistance with and you would like more information then please get in touch with our Employment team.