Historically, one of the most frustrating aspects for employers in employment tribunal proceedings was that employment claims could bring spurious claims, without running the risk of paying the other sides legal fees if they lost.
The Smith v Pertemps case put an end to that in 2011 when Mr Watts, the chairman of a recruitment company, was awarded record costs against a female former employee who had pursued a vexatious discrimination and victimisation claim.
Ms Smith claimed that her employer had subjected her to a stream of derogatory and offensive comments, but the tribunal found that the allegations were untrue and ordered her to pay a hefty £100,000 in costs.
Defending Employment Claims
Regardless of merits, defending employment claims is both expensive in terms of legal costs and management time and there can be no doubt that proceedings negatively impact on a business’s corporate profile.
It still costs an employer to successfully defend employment claims and this is one of the reasons why so many cases settle before the matter is brought before the tribunal.
Having said this, there has been significant reduction in vexatious employment claims with the introduction of claimant fees. Government figures indicate that the average number of claims per quarter in 2012/2013 (before the introduction of fees) was 48,000 and in the last quarter for 2014 the figure dramatically dropped to 18,943.
The government states that this reduction indicates that a significant proportion of tribunal employment claims brought prior to July 2013 were vexatious. However the Employment Law Bar Association disagrees and last month expressed its concern in an open letter to the government about the impact of fees on access to justice; stating that meritorious claims are not being pursued as a direct consequence of the new fees regime.
How Can A Business Strategically Deal With Vexatious Employment Claims Before Substantial Costs Are Incurred?
Well you can consider making an application to strike out a claim upon the basis that the claim is “scandalous,” “vexatious” or “has no reasonable prospect of success”; or that the proceedings have been conducted by or on behalf of a claimant in a scandalous, vexatious or unreasonable manner.
You can also consider issuing a formal costs warning and then a costs application. An employment tribunal has the ability to make a costs order against a claimant (or their representative) if they have acted vexatiously, disruptively, abusively or unreasonably in bringing the claim in the first place or in the way they have conducted proceedings.
The first step is to write to the claimant with a formal costs warning. Strategically it is helpful to deliver a costs warning in conjunction with a settlement proposal (often known as a “without prejudice save as to costs” letter) explaining that
(a) If the claimant refuses the settlement offer and
(b) Subsequently loses the claim or is ultimately awarded a lower amount than the offer, that
(c) The business will ask the tribunal for its costs.
A costs warning may alternatively be accompanied by an offer not to pursue the claimant for costs if the claim is withdrawn.
Employees need to be careful using this tactic and it is not always suitable. If the tribunal later finds that the employer was unreasonable in making a costs warning, then this could lead to an aggravated damages award (upon the basis that conduct of proceedings was malicious or high-handed).
Application For A Civil Restraint Order
Whilst rare, it is possible to make an Application for a Civil Restraint Order or Restriction of Proceedings Order in the case of a serial vexatious litigant and this involves making an application to the High Court or Employment Appeals Tribunal.
Costs are an area to watch with a number of awards made by the Employment Tribunal in 2013-2014 increasing by 36.5% since last year with 889 costs awards being made. 647 of those costs awards were made in favour of the respondent (with the largest costs award totalling £58,022).
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