When defending an employment tribunal claim, an employer will face a number of costs. Some are straightforward, and some may have a long-term negative influence on the business.
Employers do not have to pay any employment tribunal fees when submitting or responding to an employment tribunal claim. But depending on the complexity or general nature of the claim, there will likely be other fees involved.
In the event that an employer’s defence requires an expert witness, any fees involved will be payable by the business.
Paying legal fees to a solicitor to prepare a response to the claim, prepare other required documents, and represent the business at an employment tribunal will likely prove to be the highest financial cost in defending a claim.
Taking into account the length of the hearing and case complexity, it is reasonable to expect solicitor fees of over £10,000. Other fees, such as instructing a barrister, can also add up and take the bill over the £10,000 mark.
Tribunal claims can come from a wide range of workplace disputes, like unfair or wrongful dismissal, unlawful discrimination, or unlawful deduction of wages, and the factors involved can have an impact on the costs paid by the employer.
The circumstances and nature of the claim, the number of documents required, the level of damages sought, and the number of witnesses, among other elements, will affect the overall cost of defending the claim.
Although it is not possible to put a typical cost against any claim, it is sensible to assume that the final figure will increase along with the value, size and complexity of the case.
The costs that an employer will have to cover when defending a claim can be broadly categorised into three:
Legal fees
Employers facing a tribunal claim will, except for in the simplest cases, have to instruct a barrister or solicitor to help with preparing and presenting a defence. In many cases, both a solicitor and barrister will be necessary, as employers dealing with a typically complex claim will require the correct legal representation.
Unless a claim has no real chance of success, or a claimant is acting unreasonably, it is worth noting that a defending employer will rarely recover their legal costs.
Damages
If the tribunal finds the claim successful, it can make several different orders, including an order to pay damages.
This is an amount that the employer must pay as compensation for loss or harm suffered by the claimant due to the employer’s misconduct, and can run into the thousands or even tens of thousands of pounds.
Time
Tribunal hearings typically last between 1-3 days, although complicated cases can run as long as several weeks.
Taking into account liaison with legal advisors, collating documentation, or the time away from work for staff to give evidence, the impact on the business in terms of lost time can quickly add up.
In addition to these, there is also the cost in terms of the reputation of the brand and business, since tribunal hearings are a matter of public record and are often open to the public and press.
Poor publicity with regard to findings or allegations of employer malpractice can have significant consequences for a business.
Solicitors’ fees and other costs
When it comes to advice or representation for employers defending against unfair or wrongful dismissal claims in an employment tribunal, the Solicitors Regulation Authority requires solicitors to display a range, average, or total costs on their website. This means that it should be fairly straightforward for an employer to understand their legal costs from the start.
In addition to this, there may be negative impacts on a business due to employees having to postpone their regular work to prepare for the defence. Whether preparing witness statements, corresponding with advisers, collating evidence, or attending hearings, these activities all take time away from the core business productivity, and could also diminish morale in the staff involved.
For most employment claims, both sides tend to bear their own costs, and an employment tribunal is unlikely to order the losing party to pay the winning party’s costs. However, if a party, or the party’s representative, has behaved in an abusive or disruptive manner, or has been particularly unreasonable during proceedings, then the tribunal may order them to pay the other party’s costs.
There are other situations where a party may be ordered to pay costs, such as if they have breached an existing order, have postponed the hearing, or if a witness has been ordered to attend the hearing on their behalf. If an employee bringing a claim has not had access to legal advice or is unrepresented, they are less likely to face a costs order.
If a claimant is successful, what costs could the employer pay out?
If an employee is successful in their claim, then an employment tribunal may award compensation, the level of which will depend on the type of claim that they have brought against the employer.
Another factor that can influence the amount of compensation is how much money the claimant has lost due to the employer’s actions. This can include wages unfairly deducted from the employee’s salary, wages lost due to incorrect notice period upon dismissal, or even compensation for unfair treatment of the employee.
Compensation for unfair dismissal claims is made up of a basic award and a compensatory award. The basic award is a fixed sum based on the claimant’s age, length of service and salary, while the compensatory award is based on loss of statutory rights and earnings due to the employee being dismissed.
The basic award for unfair dismissal has limits on weekly pay and length of service, with a maximum award of £16,320. In most cases, the compensatory award also has a statutory upper limit of either 52 week’s gross pay or £89,493, with the lower amount being awarded.
However, if the claim is for unlawful discrimination, no cap exists, and the employee can also claim for injury to feelings. In serious cases, the negative impact on the employee’s emotional wellbeing due to discrimination could be as high as an additional £27,400 to £45,600.
Can an employer avoid employment tribunal costs?
According to Ministry of Justice figures, employment tribunals that reached a final hearing in the first quarter of 2019 found for the claimant 90% of the time.
Although this figure only represents the cases that reached a final hearing, and although this can vary depending on the tribunal judge or panel, it shows the importance of an employer resolving any claims before they reach a tribunal.
If an employer cannot avoid an employment tribunal claim, and especially if the claim has enough merit to reach a tribunal hearing, it is highly advisable to settle the claim before a hearing occurs. Avoiding a hearing will help decrease the employment tribunals cost to the employer.
The ACAS Early Conciliation process is a required step for a claim to move to the tribunal, and uses neutral negotiators to try to settle the claim. Even if this is unsuccessful, tribunals look poorly on employers that don’t sincerely or fully engage at this step.
A ‘without prejudice’ conversation can be had with the claimant, either directly or through a solicitor, in order to seek an early settlement. ‘Without prejudice’ in this case means that the content of the conversation cannot be used later as evidence.
Settling before a case gets to an employment tribunal may help to reduce the costs than an employer faces when defending a claim.
A valid settlement agreement, or COT3, will also provide the benefit of eliminating future financial liability, as these often restrict the employee from making further claims against the business.
If experts are required for the tribunal, an employer may be able to agree to share the cost of a joint expert with the claimant.
An employer facing a claim could also help to reduce their own costs by being organised with their documents or when collecting evidence, all of which will aid in decreasing the amount of chargeable time their solicitor has to spend on the case.
Get expert advice
Our team of professionals at Neathouse Partners can advise if you have questions about defending an employment claim. Our team of HR consultants and employment lawyers can help you understand how much an employment tribunal costs an employer.
Call 01244 893776 today or use our contact form.
