Whilst you hope that your business will not have to defend an Employment Tribunal Claim, it is worth informing yourself of the likely liability your business might have if an employee brings a Claim in an Employment Tribunal.
How much are Employment Tribunal costs?
There are a number of costs involved with defending an Employment Tribunal Claim, some of which are easy to calculate and others which have a less obvious initial financial cost but will likely have a negative impact on your business.
There are no longer Employment Tribunal fees to submit or respond to an Employment Tribunal Claim, but there may be other fees related to defending a Claim. For example, depending on the nature and complexity of the Claim, an expert witness for your business or a joint expert witness may need to be appointed. For example, a medical professional’s opinion might be helpful in respect of a disability discrimination claim. The fees for an expert witness that your business instructs will be payable by your business and generally a joint expert’s time spent producing a report and/or attending a hearing will be split 50:50 with the Claimant.
The highest financial cost of defending an Employment Tribunal Claim is likely to be legal fees paid to a solicitor for helping to prepare the Response to the Claim and to prepare documents and represent your business at the Employment Tribunal. You can generally expect that the solicitor fees will be upwards of £10,000 dependent on complexity of the case and length of hearing. If you would like more information on our competitive fees in employment cases, please see here. There are also likely to be other legal fees relating to the costs of instructing a barrister if a specialist opinion is needed and often for advocacy at the final hearing and sometimes at a preliminary hearing.
Solicitors are required by the Solicitors Regulation Authority to provide a guide to total costs, average costs or range of costs on their website relating to advising and representing employers defending Employment Tribunal Claims for unfair dismissal or wrongful dismissal. Particularly when responding to those types of Claim it should be clear what your legal costs will be from the outset.
There are other hidden financial costs such as the cost of your employees’ time in preparing your defence against a claim, whether this be gathering evidence, corresponding with advisers or preparing witness statements and attending hearings. This all distracts from running your core business and may have a negative impact on your business’ productivity and profitability, it may also lead to poor morale for those involved in additional work defending your business. Additionally, there is a risk that if your business is unsuccessful in defending an Employment Tribunal claim there may be reputational damage or risk of further claims being brought by other disgruntled employees.
In terms of the Claimant’s costs, in employment claims each side tends to bear its own costs and do not generally "follow the event". The Employment Tribunal will not necessarily make an order that the losing party pays the winning party's costs as is often the case in civil court litigation.
However, it is possible to be liable for the other side’s costs in an employment matter. An Employment Tribunal must consider whether to make a costs or preparation time order if a party, or their representative, has acted vexatiously, abusively, disruptively, or otherwise unreasonably in the bringing or conducting of the proceedings, or if any Claim made had no reasonable prospects of success. It Is also possible for an Employment Tribunal to make such as order if a party has been in breach of any order or practice direction or if a hearing has been postponed or adjourned on the application of a party.
In addition, where a witness has attended, or been ordered to attend, to give oral evidence at a hearing, an Employment Tribunal may make a costs order in respect of the expenses incurred in connection with their attendance. If an employee is unrepresented and not had access to legal advice, it is less likely that a costs order will be made against them.
What compensation can an employer expect to pay out?
In addition to the above costs, if the employee is successful in their Employment Tribunal Claim, an Employment Tribunal may choose to award compensation. The level of compensation will depend on the type(s) of Claim(s) that your employee brings. In the case of a successful unfair dismissal claim a basic award and compensatory award will be awarded and the basic award will be based on the age, length of service and wage of the employee in question. Breach of contract claims are capped at £25,000, but in the case of discrimination, compensation is uncapped and so it is worth taking advice from an expert employment lawyer at an early stage as to what the likely financial liability for your business is.
Can Employment Tribunal costs be reduced or avoided?
In the absence of being able to avoid an Employment Tribunal Claim altogether, it is advisable to engage fully in the ACAS Early Conciliation process required for the vast majority of claims to be able to progress to the Employment Tribunal. If ACAS Conciliation is unsuccessful or moves too slowly you could try a direct without prejudice approach yourself or through your solicitor to see if settlement can be reached. If you can settle at an early stage, it could save both parties time and money in continuing with Employment Tribunal proceedings all the way to final hearing. A valid COT3 or settlement agreement will also have the benefit of there being no ongoing financial liability for your business, as the employee will be precluded from bringing future employment claims against your business. You can see further information about settlement agreements here or our specialist employment lawyers can further advise you.
If there are experts to be instructed, if you agree to appoint a joint expert so that both sides can halve the fees, this can save costs.
If your solicitor is acting on an hourly rate basis, keeping well appraised of fees on a regular basis and being organised when sending documents and taking time to collect evidence and draft accurate, comprehensive, factual statements to save solicitor time, are good ways to reduce these fees.
Do Employment Tribunals favour employers?
Looking at the statistics it does appear that Employment Tribunals favour employees. In 2019 according to Ministry of Justice figures from the first quarter of the year only 10% of Employment Tribunal claims were won by employers.
However, it can depend on the individual Employment Tribunal and individual Employment Judge or panel, some are more sympathetic to employers than others. Further, this is only reflective of those cases that reach final hearing, the vast majority of claims do not get that far and Claims have to have merit to reach the final hearing without being struck out.
Defending an Employment Tribunal claim can be a costly exercise, but if this is unavoidable, seeking advice at an early stage is advisable. The likely legal costs, risk to reputation if a case is lost and cost of time spent to defend a claim to final hearing versus cost of settlement should be weighed up. Our employment law experts can assist with assessing your claim and likely costs defending or settling these. For further information about how we can assist you defend an Employment Tribunal Claim and about our extremely competitive rates using our subscriptions services, you can make contact with our employment lawyers here.