Settlement Agreements and Costs

With every passing month further statistics are released confirming the sharp decline in the number of Employment Tribunal claims. From April to June this year, statistics revealed a 71% drop in claims compared with the same period last year. While some cheer each passing announcement; there is a mounting concern that the Employment Tribunal fees regime is imposing a significant barrier to employees’ access to justice.

Since 29 July 2013, the Employment Tribunal anyone seeking to bring a claim in the ET had to pay an issue fee (£250 for an ordinary unfair dismissal claim) when lodging a claim and a hearing fee (95)) prior to the final hearing. The level of fee depends on what type of claim is being raised. For Claimants with very limited resources there is a fee remission system but the numbers of remissions granted have been low.

Many claimants are simply unable to afford the fees, often after having lost their jobs and rely on legal expenses insurance in order to pursue a claim. Both claimants and insurers were able to breathe a sign of relief when the Employment Appeals Tribunal decided that it was possible to award costs to the receiving party even if they had their legal expenses paid by an insurer.

In a recent case, Mardner v Gardner, the Claimant was successful in her case before the employment tribunal and applied for costs. Despite the costs threshold having been crossed, the employment tribunal incorrectly refused to award the Claimant her costs due to the fact that she was not personally out of pocket and because her case had been funded by her legal expenses insurers.

The EAT held this was wrong because a matter of public policy states that the paying party “should not avoid the costs consequences of their unreasonable conduct merely because the receiving party prudently entered into an insurance contract”. That would allow the paying party to effectively “get away with” their unreasonable conduct on the basis of the Claimant’s insurance. It would be inappropriate for the benefit of the Claimant’s insurance, to be enjoyed as a blanket of immunity against costs awards for wrongdoing employers.

With the introduction of early conciliation, and often extensive legal advice employers have no excuse for acting in such a fashion as to trigger a costs award against them. Employers should ensure that they do not act unreasonably and within the confines of the law.

If you are in position where you have not signed a settlement agreement and are investigating the extent of your legal expenses insurance please do not hesitate to get in contact with a member of the team.

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