Costs Warning Letter

Employment Tribunal Costs Warning Letter

Navigating the Employment Tribunal (ET) requires rigorous case management. If you are defending a claim that appears baseless, vexatious, or is being pursued unreasonably, a formal Costs Warning Letter is a crucial strategic tool. This letter serves to put the Claimant formally on notice that their continued conduct risks a costs award against them, thereby maximising your chances of recouping legal expenses under the Employment Tribunal Procedure Rules 2024 (ET Rules 2024).

Why Issue a Costs Warning?

In the Employment Tribunal, costs do not automatically "follow the event" (meaning the loser does not automatically pay the winner’s costs). However, the tribunal must consider making a costs order or a preparation time order if certain statutory thresholds are met (Rule 74(2) ET Rules 2024).

While a costs warning is not a necessary precondition to making a costs order, serving one is considered good practice. A well-executed costs warning can be instrumental in establishing that the Claimant acted unreasonably in continuing to pursue the claim after the flaws were clearly articulated.

The Legal Grounds for a Costs Award (Rule 74(2))

We help you draft the warning by clearly linking the Claimant's behaviour or the claim’s weakness to the specific legal grounds for costs:

1. Unreasonable Conduct (Rule 74(2)(a))

This applies where a party or their representative has acted vexatiously, abusively, disruptively, or otherwise unreasonably in bringing or conducting the proceedings. Examples that justify a cost warning include:

Unreasonable Pursuit

Continuing to pursue claims that have no reasonable prospects of success.

Late Withdrawal

Withdrawing a claim at the last moment (e.g., on the first or last day of the final hearing) after the Respondent has already incurred substantial costs.

Dishonesty

Conducting the case by providing false evidence or lying to the tribunal (a category which often results in a firm judicial line being taken).

Vexatious Litigation

Bringing claims that are "frankly ludicrous" or are pursued with little or no basis in law, subjecting the Respondent to disproportionate harassment and expense, often due to an improper motive (such as seeking leverage for settlement or attempting to exploit the tribunal system).

Ignoring Reality

Continuing to seek a remedy (such as re-engagement) "long after it [became] blindingly obvious that no such remedy was remotely practicable".

Failing to Engage

Failing to properly engage with the Respondent's explanations for why the claim is misconceived.

2. No Reasonable Prospect of Success (Rule 74(2)(b))

This ground is engaged where any claim, response, or reply is deemed to have no reasonable prospect of success. We assist you in identifying the points in the claim that are objectively hopeless, such as:

• Whistleblowing claims that are cynical or lack a subjective belief in the public interest, contrived purely to avoid the statutory cap on unfair dismissal awards.

• Claims where the alleged wrongdoing was caused by a body external to the employer.

• Where the Claimant proceeds with a claim in full knowledge that their own misconduct or dishonesty caused the dismissal.

• Claims founded upon serious allegations (e.g., personal injury based on a miscarriage allegation) where the Claimant lacks supporting evidence.

Key Strategic Requirements of the Cost Warning

For the cost warning to be adequate, it must be drafted strategically. When assessing a subsequent costs application, the tribunal will consider the effect of any costs warning that was given. Case law confirms the following best practices:

1. Clarity and Simplicity

   The warning must be drafted in accurate, straightforward, and simple terms. Avoid overly technical language or legal jargon when addressing a Litigant in Person.

2. Detailed Explanation

   The letter must explain why the claim or specific part of the claim is misconceived. This includes setting out the relevant legal test (e.g., the Burchell test for fair dismissal) and detailing the flaws in the Claimant's specific case.

3. Warning of Application

   The letter must explicitly warn the Claimant that an application for costs will be made if the claim or parts of the claim are not withdrawn.

4. Date Trigger

   The letter establishes a critical date from which the Claimant’s continued pursuit of the claim may be deemed unreasonable conduct. If the Claimant persists, the tribunal may later award costs dating from the point the warning was issued.

5. Recommendation

   It is advisable to recommend that the Claimant seek independent legal advice (as occurred in Growcott v Glaze Auto Parts Ltd [2012] UKEAT/0419/11/SM).

The Costs Warning Letter

We provide a bespoke Costs Warning Letter, designed for Respondents, ensuring:

Legal Compliance

Our cost warning includes mandatory references to Rule 74(2) of the ET Rules 2024 and clearly sets out the objective standard required for a successful defence against costs.

Specificity

Guidance on how to accurately identify the specific allegations that lack reasonable prospects, ensuring the letter targets discrete issues for which deposits may have been ordered.

Actionable Content

Clear prompts to demand the withdrawal of the entire claim or part of it, setting a reasonable deadline for response.

Disclaimer

Issuing a cost warning is a serious step. Failure to accept a settlement offer alone does not justify a costs order. The focus must be on the unreasonable conduct or the lack of prospect of success of the claim itself. Professional legal advice should always be sought before sending this communication.