Tribunal Costs Reforms

Implementation of a new set of Tribunal Rules of Procedure has been delayed
until 16 July to allow more time for tribunal users to understand the changes.
The key change benefiting employers will be the introduction of wider powers
for the tribunal to award costs. Currently, there is little to deter employees
bringing weak claims, so many employers make commercial offers to settle,
rather than pay the almost certainly irrecoverable costs of defending the

Key changes

– The tribunal will be under an overriding objective to deal with cases
"justly". This includes acting fairly and expeditiously, ensuring
parties are dealt with equally, acting proportionally with the complexity of
the case and saving expense. Both parties will have a duty to help the tribunal
further its objective.

– Tribunals may award costs where a party acts "vexatiously, abusively,
disruptively or otherwise unreasonably" (as at present) but also where the
party is "misconceived" in bringing or conducting the claim.
Employers who ignore a claim and do not appear at the tribunal may also be
ordered to pay the employee’s costs.

– Tribunals will sometimes have powers to strike out IT1 Applications and
IT3 Notices of Appearance without a hearing.

– The maximum costs a tribunal can award "on the spot" will
increase from £500 to £10,000. This will be a disincentive for an employee to
mount a spurious claim and reflects more accurately the modern-day costs of

– Failure to comply with the tribunal’s directions (such as providing
witness statements or evidence) may result in an award of costs or can result
in an employer being barred from defending the case altogether. If the tribunal
sets a timetable, ignore it at your peril!

– If an employer can establish at a pre-hearing review that an employee’s
claim has no reasonable prospect of success, the tribunal can request that the
employee pays a deposit of £500 before continuing with his or her claim. This
is an increase from the previous limit of £150 and is already in force.

Practical effect

The Government is hoping to stem the rising number of tribunal applications.
Costs are currently ordered in less than 1 per cent of cases, and employers are
hoping tribunals will exercise their new powers by striking out weak
applications and awarding costs more readily to discourage weak claims.

But with an ever-increasing number of employees’ rights on the statute
books, it is unlikely that the number of claims will fall significantly. The
threat of costs will, however, become a useful litigation weapon.

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