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Employment Act 2002

Costs and expenses

57.The Employment Tribunals Act 1996 authorises employment tribunal procedure regulations to provide for the award of costs or expenses (costs are known in Scotland as expenses). The regulations provide that where in the opinion of the tribunal a party has in bringing the proceedings, or a party or his/her representative has in conducting the proceedings, acted vexatiously, abusively, disruptively or otherwise unreasonably, then the tribunal shall consider whether to award costs against that party and may do so. Similarly, costs may be awarded where the bringing or conducting of the proceedings by a party has been misconceived (which includes having no reasonable prospect of success). The regulations do not give tribunals a general power to award costs against the losing party, in the absence of these factors. There will be no change to the circumstances in which the tribunal may award costs against such a party.

58.As far as the Employment Appeal Tribunal is concerned, the power in the Employment Tribunals Act 1996 to make rules dealing with costs and expenses is limited to cases where the proceedings were unnecessary, improper or vexatious or there has been unreasonable delay or other unreasonable conduct in bringing or conducting the proceedings.

59.In its consultation document ‘Routes to Resolution’, the Government suggested “all concerned - users, their representatives and the tribunals - must play their part in ensuring that time wasting is minimised.” Specifically, the document proposed giving the tribunals new powers to make orders for wasted costs against representatives are acting on a for profit basis; changing the presumption on costs; and allowing any costs awarded to include the time spent preparing the case. Currently employment tribunals cannot include in any award an amount to reflect time spent by a party preparing for the employment tribunal claim and there is no power to make an award directly against a representative, where his/her behaviour has been found inappropriate

Section 22: Awards of costs or expenses against representatives

60.This section extends the scope for making employment tribunal procedure regulations set out in section 13 of the Employment Tribunals Act 1996 (costs and expenses). It does this by substituting subsection (1) of section 13 with four subsections.

61.Specifically, the amendment gives the Secretary of State power by regulations to authorise tribunals to make awards of costs directly against a party’s representative, because of the way the representative has conducted the proceedings. The award could mean that the representative may not recover his/her fees from the client, or that he/she has to pay costs incurred by the client, or costs incurred by the other party, as a result of his/her misconduct. It is intended that the regulations will include safeguards to allow the representative the opportunity to put his/her case on any proposed award. The regulations will also be able to define “representative” so as to exclude the not-for-profit sector from wasted costs orders.

Section 22: Payments in respect of  preparation time

62.This section also inserts a new section 13A into the Employment Tribunals Act 1996. It gives the Secretary of State power by regulations to authorise tribunals to order that one party make a payment to the other in respect of the time spent in preparing the other party’s case. It is not intended that the parties should have to provide detailed evidence of the actual time they have spent preparing for a case, but that the tribunal should make an assessment based on guidelines to be set out in the Employment Tribunal Rules of Procedure. It is intended that the new awards could be made only in the circumstances in which a costs award may be made at present, that is, where the party’s case is misconceived, or they or their representative have behaved vexatiously, abusively, disruptively or otherwise unreasonably.

63.The new section 13A provides that the regulations on costs and preparation time must include a provision that the tribunal may not make an award of both costs and preparation time in favour of the same person in the same proceeding.

64.The amendments made by section 22 also contain specific powers for the procedure regulations to allow tribunals to take into account a party’s ability to pay when making a costs or preparation time award. This is because a recent Court of Appeal decision in Kovacs v Queen Mary & Westfield College and the Royal Hospitals NHS Trust ruled that a tribunal may not take into account a party’s ability to pay when making a costs award. The Government believes that the tribunal should have the discretion to consider a party’s means, where appropriate. This will be given effect in the regulations.

Section 23: Costs and expenses in the Employment Appeal Tribunal

65.This section replaces the existing section 34 of the Employment Tribunals Act 1996, which deals with costs in the Employment Appeal Tribunal. The power is aligned with the power to make costs rules for employment tribunals. Thus the power to make rules for the EAT is no longer limited to certain types of case, there is provision for wasted costs orders against representatives and specific provision for taxation or detailed assessment of costs. The rules will set out the limited circumstances in which costs orders can currently be made in the Employment Appeal Tribunal (see paragraph 58 above). The new section 34 also provides for the Employment Appeal Tribunal rules to enable the EAT to take into account a party’s ability to pay when making a costs award.

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