Rising tribunal claims and cost awards

This sharp rise in claims, which reached 9,100, reflects a staggering 234% increase compared to the previous year. Alongside this growth, it is crucial to understand the dynamics around cost awards, where tribunals can order employers to pay legal fees for employees and vice versa. Fresh insights from LegalVision, analysing over two million tribunal claims from the Ministry of Justice covering the period from 2007 to 2024, shed light on the evolving landscape.

For small and medium business owners, the financial impact of an employment tribunal claim can be substantial, even if the claim is unwarranted. Legal proceedings can incur costs running into thousands of pounds, leading many employers to hesitate before making legitimate decisions. Interestingly, many employers remain unaware that opportunities exist to recover some of these legal costs. LegalVision's study shows that despite the increase in tribunal claims, a notable 68% of cost awards favour employers, while the sums awarded have dramatically increased.

Significant highlights from the study include the average cost award rising to £4,313, reflecting an astonishing 210% growth since 2007/08. The maximum average cost award has seen a fivefold increase, soaring from £35,915 in the early years of the study to £197,504 in recent years. Despite the volume of cost awards decreasing by 58% between 2007/08 and 2023/24, when they are granted, they predominantly favour employers.

Data reveals that overall, employers have been awarded two-thirds of all cost awards made between 2007/08 and 2023/24, a clear indicator that tribunals are inclined to rule against claimants if unreasonable behaviour is evident. Out of 8,245 total awards, 5,641 were granted to employers. However, it is essential to note that cost awards remain rare, with just 0.37% of claims resulting in a cost award, illustrating that tribunals apply these awards selectively, reserving them for truly unreasonable cases.

The effect of tribunal fees introduced in 2013 led to a drastic reduction in claim volumes, yet the percentage of claims resulting in cost awards momentarily surged to 1.42% in 2014/15. After the Supreme Court dismantled tribunal fees in 2017, claim volumes rebounded, and the cost award rate stabilised back to its historical norm.

For employers navigating the complexities of tribunal claims, three key takeaways arise from the data. Firstly, businesses should not overlook their potential for cost recovery; over two-thirds of claims that result in cost awards are granted to employers. Additionally, documenting any unreasonable conduct through the proceedings is vital for supporting cost applications. Lastly, seeking early legal advice is crucial for identifying relevant conduct that may lead to successful cost applications, rather than attempting to establish a case retrospectively.

With a growing awareness of potential cost recoveries, employers are encouraged to approach employment tribunal challenges with informed confidence.