High costs of tribunals are a sign of the times

The number of cost orders made in employment tribunals has risen in the past
few years, along with the amounts awarded, and this trend looks set to continue

Employers beware: the number of cost orders made in tribunals has shot up.
Between 1990 and 2000, about one order in every hundred cases heard was made
each year. That shifted to one in every 30 in 2001/2, and the figures for
2002/3 were one in every 22.

The statistics are available from the reports published by the Employment
Tribunal Service, and they reveal a significant change in the attitude of the
tribunal judiciary. Once a rarity, orders for costs are now relatively common,
and the fact they are being made so often will encourage applications to be
made where, in the past, parties would not have bothered.

The size of the orders made has also increased. In 2002/3, the average award
was £1,524. In the previous year, the average was only £983 – a big rise in one
year. But the picture becomes more intriguing on closer inspection. In 2001/2,
the number of awards above £1,000 was less than 20 per cent of all awards made.
Last year, this increased to 36 per cent. It is appropriate to ask why the
change has occurred and what it implies for the future.

The shift began in 2001/2, when the number of applications to tribunals
peaked at 130,408. This resulted in a huge amount of adverse publicity
generated by outraged employers, and some may think that tribunals reacted to
that pressure. However, this is unlikely. For years, there was resistance to
awarding costs, although the rise in the number of cases was steep. The number
of cases disposed of at hearings more than doubled between 1990/1 and 1993/4,
and yet the number of cost orders in 1993/4 was half those made in 1990/1. In
addition, the reduction in the amount of cases since 2001/2, though also well
publicised, has not led to a reduction in cost orders, but the opposite.

Then there were the changes in the rules governing the awarding of costs in
July 2001, which included a huge shift in the maximum a tribunal could award
from £500 to £10,000. That was certainly the move of a Government that wanted
to be seen to clamp down. This was a reaction to public pressure, but the minds
that needed to change were those of the tribunal judiciary.

For some, the rule changes are seen as the reason for the change. To
lawyers, the removal of the test of ‘frivolous’ and replacing it with
‘misconceived’ may appear to be a move of substance. They may also like to
think that the platitudinous ‘overriding objective’ makes a difference.
However, for most tribunals, this is unlikely. If a tribunal wants to make an
order for costs, it will find the conduct of one of the parties ‘frivolous’ as
easily as ‘misconceived’ if it wants to, and, as it is an exercise of
discretion, the members know they are unlikely to be overturned on appeal.

The reason cost awards were rarely made before was that most tribunal panels
considered such orders to be contrary to their ideal of what a tribunal was.
The original rule about costs said they were "not normally awarded".

The tribunals were conceived as an alternative to a court process, a speedy
method of resolving employment disputes entailing less formality and expense.
Complaints of their ‘legalism’ may have existed since they began, but the received
wisdom was that there was a virtue in trying to combat that trend, and the
reluctance to order costs was part of that ethos. It is logical to conclude
that many tribunal chairmen and members have now abandoned that vision,
resulting in the increase in the frequency of costs orders.

The change of attitude can also be seen as part of a general drift towards
formality and prescriptive procedures. Expect the trend to continue, as there
are more rule changes in the pipeline that will encourage cost orders.

By Stephen Levinson, Solicitor and head of employment law, Maclay,
Murray & Spens

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