Employment Tribunal – Employer’s Legal Costs

In an ideal world an employer will have sought legal advice from the outset when considering whether to dismiss an employee. The instructing solicitor will have walked the employer through the necessary steps and procedure to avoid an unfair dismissal claim arising.

However, we do not always live in an ideal world. And even if the employer has sought legal advice and acted reasonably, it does not mean the employee will not bring a claim anyway. This is particularly the case now that the tribunal fees have been abolished, as most employees have nothing to lose at the outset of bringing a claim.

Defending a claim can be expensive. It is difficult to provide a fixed fee quote for the overall fee as the legal costs will depend on the complexity of the claim, the conduct of the employee and/or his/her solicitor and how long the matter takes to conclude.

For example, if the matter settles before the need to respond to a claim then the costs will be minimal but if the matter proceeds to a full hearing and there are adjournments etc. the legal costs could very likely exceed £15,000 plus VAT.

Here at Sykes Anderson Perry, we like to provide our employer clients with a breakdown of the stages involved in defending a claim all the way through to a hearing with a cost estimate at each stage.

The first time an employer will learn that the employee is considering a claim should be when that employee raises a grievance and/or appeal the decision to dismiss. However, in reality it will be when they are contacted by ACAS.

So what do you do...

ACAS early conciliation (EC)

An employee bringing the claim will be referred to as a claimant.

All claimants must contact ACAS and obtain a certificate before a Tribunal will accept their claims. Once the claimant has initiated this stage, an ACAS officer will contact the employer to see if there is a possibility of a settlement – this is a forum for mediation.

Whether or not you should settle will depend on the strength of the employee’s case and your potential liability.

We will arrange either an initial telephone conference or meeting, during which we will obtain as much information as possible from you relating to the claim. This will help us to identify the potential defence you may have, the strength of the employee’s claim and the potential liability.

At this stage, it is often very helpful and cost effective if you come prepared with the following:

  1. Contract of employment for the employee and his/her salary and benefit package;

  2. A written summary of all that has happened leading to the dismissal and claim being brought;

  3. Relevant correspondence/emails to and from the employee; and

  4. Any other relevant documentation – for example, staff handbook.

The first 30 minutes is free. Thereafter, we would usually limit our costs to between £250 and £750 plus VAT to assess the claim. This will include reviewing the necessary documents, identifying the potential claims the employee could have, defences available and the cost implications.

If it is worth considering a settlement then the fees for negotiating this will generally be between £250 and £750 plus VAT. This will include negotiating via an ACAS conciliator on your behalf with a view to an early settlement of the claims.

ET1 – the claim form

This is the form on which the employee will set out the claims being brought and compensation sought.

A copy of this will be sent to you to review and respond. At this stage, it will be necessary to identify the:

  1. claims;

  2. timing issues – there are strict time limits which an employee must adhere to when bringing a claim;

  3. facts agreed;

  4. allegations admitted; and

  5. allegations denied.

The fees to review and advise on the ET1 will be between £250 and £500 plus VAT.

ET3 – response

The employer responding to a claim will be referred to as a Respondent.

The ET3 is prepared by the employer and is a response to the claims set out in the ET1. Usually, an employer will have 28 days to prepare the response and time is of the essence here.

Not responding to the claim or a late submission of the ET3 could result in a judgement in default. It then becomes quite difficult to reverse such a judgement.

The fees for drafting and submitting the ET3 – response will be between £1,000 and £1,500 plus VAT.

Case management orders

Once the judge has seen both the ET1 and ET3 they will give several directions. Again, the directions will depend on the claim and what has and has not been admitted.

Generally, these could include the following:

  • Amending claim or response;

  • Further and better particulars;

  • Mediation;

  • Specific disclosure*;

  • Disclosure of lists and documents;

  • Schedule of loss and mitigation evidence;

  • Expert evidence*;

  • Preliminary and further preliminary hearing*;

  • Witness statements;

  • Preparation of hearing bundle;

  • Chronology;

  • List of agreed facts and outstanding issues;

  • Skeleton arguments and authorities;

  • Written submission.

* these are usually associated with claims involving discrimination elements.

The most time consuming and costly directions relate to the preparation of the witness statements and the hearing bundle. These together with the ET1 and ET3 are the key documents to a successful claim. A judge has limited time to review the documents before the hearing and often they will rely on these documents so it needs to read well – almost like a book. References to the documents need to be accurate and without fault. If you have mis-referenced, it is unlikely the judge will spend time looking for the correct document to which you are referring to.

The employer is responsible for preparing the hearing bundle, and without a doubt one of the most costly exercise at this stage is separating the email chains. If you can help to do this then it will reduce your legal costs.

Usually, the costs for preparing the hearing bundle will be between £1,000 and £1,500 plus VAT.

The number of witnesses involved and how competent the witnesses are with drafting the statement independently will determine the legal costs. Usually, these will be between £1,000 and £3,000 plus VAT.

The other potentially costly direction is the preliminary hearing, particularly if it is necessary to appoint a barrister for the advocacy and/or travel to a tribunal. Often, it is possible to convert the hearing to a telephone-based hearing. This can save costs. Preliminary hearings are important and will usually give you an indication of what the final outcome will be, and so it is necessary to prepare for them appropriately.

The costs for preparing and attending (including potentially advocating) the preliminary hearings could be between £750 and £1,500 plus VAT. It does not include the barrister’s fees.

The hearing

A hearing can be scheduled to last between 2 and 5 days. The more complex the claim the longer it will take. Equally, if there are several witnesses involved then it will clearly take more time to hear and cross examine them.

It is often more appropriate to appoint a barrister to do the advocacy but it is possible for solicitors to do the advocacy.

The costs of preparing and attending (and potentially advocating at) the hearing can be anywhere between £2,000 and £6,000 plus VAT. It also includes time spent to prepare for the hearing itself, for example, preparing copies of the bundle of documents. This does not include the barrister’s fees. It is not necessary for both a barrister and a solicitor to attend the hearing. However, certain barristers will prefer to have the solicitor present as they will have prepared for the hearing and can locate the necessary documents/evidence quickly and efficiently.

Funding the claim

It is possible that you have legal insurance as a company. So, it is worth checking your policy, and if you do have legal expense insurance then you should contact your insurer straight away and ask for their advice. Usually, the insurance company will have a panel of solicitors and will prefer you to use their solicitors but there is no harm in asking your insurance company if they would be agreeable to you appointing your own solicitors. Defending an employment claim can be very stressful, and it is important to have a solicitor you can trust and are happy to work with. Whether or not your insurance company agrees will usually come down to the hourly rate of your solicitors. We would be happy to liaise with your insurer in these instances.

There are firms of solicitors who would be willing to act on your behalf on a contingency basis – i.e. no win no fee. It is not our usual practice here but we will consider this on a case by case basis.

Recovering your costs

Unfortunately, cost orders do not follow the event in an employment tribunal. This means even if you were successful you may not necessarily recover your legal costs. Conversely, if you were unsuccessful in your defence, it is very unusual for the employee to obtain a cost order for you to pay his/her legal costs.

It is not impossible to have your legal costs reimbursed but it is rare, and more so for the employer.

Final word...

If a former employee has brought a claim against your company then do get in touch. Take advantage of the first 30 minutes free of charge. It will normally be enough to give you an understanding of what are the claims, your liability, if any and what you should and need to do.