Here we list a selection of key cases on employment tribunals, providing a summary of the decision and implications for employers.

[2018] EWCA Civ 847 
Issue: Taxation of injury to feelings compensation

Facts

A Mr Moorthy who had been an executive director of operations at an engineering company settled his claim for unfair dismissal and age discrimination against his former employer. He was paid £200,000 as compensation for "loss of office and employment" under the settlement agreement. The employer treated the standard £30,000 of this as exempt from tax.

This was in “full and final settlement” of his existing claims and any other claims arising out of his employment or its termination.

This key issue was whether any part of the settlement sum was not taxable by the exemption for payments or other benefit for injury to an employee. The alleged injury being the injury to Mr Moorthy’s feelings in the context of his age discrimination claim.

Henderson LJ, with whom the other judges agreed, allowed the appeal on the exemption issue, declaring that “£30,000 of the £200,000 paid to him is exempt from income tax under section 406 of ITEPA 2003, being a payment made to him on account of injury to his feelings in the context of his age discrimination claim.

Decision

The Court of Appeal confirmed that under the law at the time, payments for injury to feelings could fall within the exemption that allows termination payments for injury to be paid tax free. The court decided that the tax exemption for injury payments was not just confined to medical conditions, but the law has since changed again.

Implications for employers

The issues behind this case led to changes in the law. The basic rules state that:

  • Compensation for loss of office can be paid tax free up to limit of £30,000.
  • Some other payments related to personal injury, death or disability can be paid tax free.

Legislation has been amended from April 2018 so that payments for injury to feelings are fully taxable and do not fall within the exemption for personal injuries. 

Employers need to consider:

  • If any alleged discrimination was connected to the termination. If it was connected, then tax will be payable if the total compensation payments exceed the ‘normal’ £30,000 tax free limit.
  • If there is a clear medical condition preventing the employee from carrying out the duties of employment. Compensation for psychiatric conditions will still be tax exempt is if there is a clear medical condition preventing the employee from carrying out the duties of employment.

Whether a payment of injury to feelings could be exempt from tax has long been a controversial issue. Opinions were divided as to whether a payment of injury to feelings could be exempt from tax. The issue often arises in disability discrimination claims. Employers should assume that compensation for injury for feelings is taxable but if a clear medical condition results this may still attract a tax exemption.

[2017] UKEAT/0090/17/DA
Issue: Limitations of protected conversations

Facts

An IT consultancy had concerns over an employee’s performance. He was a technical ‘architect’ who had been employed by them for over 2.5 years. After a brief meeting raising the concerns he was sent two letters, one inviting him to a disciplinary hearing and the second letter headed “without prejudice and subject to contract”. In this letter he was offered a settlement agreement plus three months' notice. The offer expired if it was not accepted before the disciplinary hearing.

The settlement agreement was not signed but Mr Basra said he accepted the offer ‘subject to contract and without prejudice’ and instructed solicitors who informed the employer that he was signed off with stress and would not attend the disciplinary hearing. The employer then wrote to confirm that his employment had been terminated by mutual agreement.

Mr Basra claimed this letter in fact dismissed him and sought to claim unfair dismissal. The employers said there had already been a mutual termination based on their earlier offer and his acceptance.

The key issue was that if the date of termination and the reason for the termination are both in dispute, were the settlement conversations fully protected or could the tribunal be informed about the nature of the discussions.

Decision

The EAT decided that where the exact date and nature of the termination are disputed, the full protection from protected conversations will not apply.

Implications for employers

The law enables employers to open discussions with employees about possible termination of their employment without being worried about those discussions being revealed later on. In most cases protected conversations remain private and cannot be considered by an employment tribunal if a later claim arises. For without prejudice discussions there needs to be a prior dispute before protection arises. There is no similar requirement under the protected conversation process for a prior dispute to exist before the conversations can commence. However in certain circumstances, this exclusion may be limited:

  • Normally employers and employees should not even make reference to the fact that protected discussions have taken place.
  • The protection provided by protected conversations only extends to unfair dismissal claims anyway.
  • The protection of protected conversations is a legal requirement   and cannot be waived even by the consent of the parties. 

However where the nature of the dismissal and effective date of termination are both in question the normal protections may not apply. Employers should remember that if there is any doubt as to the nature of a dismissal, they should not rely on the fact that the discussions can be kept fully secret.

Issue: Employment tribunals – fees

In early 2014, Unison brought judicial review proceedings in the High Court claiming that the introduction of fees in 2013 denied potential tribunal claimants access to justice and was discriminatory. Prior to the fees’ introduction, access to the employment tribunal system had essentially been free since the 1970s.

The trade union alleged that the fee system prevented genuine claims against employers and had a discriminatory effect on certain protected groups such as women, ethnic minorities and disabled workers.

Unison was initially unsuccessful in the High Court, and at the Court of Appeal, for a number of reasons, including insufficient evidence being available at the time to assess the full impact of the fees regime. However, permission was granted to appeal to the Supreme Court.

In July 2017, the Supreme Court delivered a landmark judgement, deciding that the fees were unlawful under both UK and EU Law, because they prevented access to justice. The evidence collected showed that the fees had led to a dramatic fall in the number of employment tribunal claims over the four years since they were introduced. Figures from the Ministry of Justice revealed that the number of single claims made to employment tribunals had fallen by 72%.

In particular, the fees were indirectly discriminatory under the Equality Act 2010, because the higher fees applicable to Type B claims (such as those involving equal pay) put women at a particular disadvantage, since a higher proportion of women bring such claims than bring Type A claims (such as those for unfair dismissal).

Implications for employers

The employment tribunal fee system operating from July 2013 to July 2017 has been found to be unlawful, with the result that the government has stopped charging fees in both employment tribunals and the Employment Appeal Tribunal. The on-line tribunal submission portal has been changed accordingly.

While tribunal claims are now likely to increase, the new system of Acas early conciliation introduced alongside the fees has encouraged settlement, and this may help prevent claims reaching quite as high a level as that which existed before July 2013. Also, the case does not mean that charging any tribunal fees is unlawful. The government could introduce a new system, perhaps with lower fees, payable both for bringing and defending claims. 

For the time being, the absence of fees during Acas early conciliation, and any direct negotiation between employee and employer, will make threatened claims more likely to proceed, which in turn will have an impact on employers' financial offers and negotiating tactics.

Throughout the Unison case, the government argued that the fees were lawful, but promised if it lost the case, that all the fees raised over the last four years would be reimbursed. The government has confirmed that it will keep this promise. The sum involved is reported to be around £32 million.

The fees will be repaid under a refund scheme, yet to be announced. In some cases, the tribunal fees can just be directly repaid to the employee. In other cases, for example, where the employee won his or her claim, the employer may already have reimbursed tribunal fees to the employee as part of the compensation paid. The government may reimburse the employer in these situations. However, it is not clear if fees reflected in amounts paid by employers under settlement agreements will be repayable.

Some employees will have been deterred from bringing claims between 2013 and 2017, and it is possible they may sue the government for compensation accordingly. It is also possible that employment tribunals will be asked to allow for the late submission of claims (outside the normal three-month time limits) if an employee was deterred from making a claim in time because of the fees.

Organisations should always focus on preventing claims; better people management can help to defuse conflict before it escalates. They should also co-operate with Acas early conciliation, and any other alternative employment dispute resolution methods, so that litigation is not the preferred option.

[2017] IRLR 844. 
Issue: Discrimination compensation uplift

Facts

A cleaner for London Underground in High Holborn London was initially employed by Rentokil but her employment transferred to another employer Vinci Construction (UK) Ltd. The cleaner claimed disability discrimination (including harassment and victimisation) based on various forms of bullying and other mistreatment.

Before the full hearing the employer admitted liability for the complaints, which related primarily to events before it had taken over. As liability was admitted there was a hearing only on compensation. This lead to £9000 for injury to feelings and £3300 for psychiatric injury which related to worsening of a depressive illness from which the cleaner had suffered from. The key issue on appeal was if the awards especially for psychiatric injury should have had the 10% uplift corresponding to uplifts that were happening in the civil courts.

Decision

The Court of Appeal held that the 10% uplift on general damages in all civil claims should also apply to Employment Tribunal awards for injury to feelings and for psychiatric injury. The court restored the tribunal’s award of £3300 for psychiatric injury and increased its award of £9000 for injury to feelings to £9900.

The Court of Appeal said the President of Employment Tribunals in England and Wales should issue fresh guidance on injury to feelings compensation in relation to adjusting the compensation bands to account for inflation and to incorporate the 10% uplift.

Implications for employers

This case resolved some of the issues around how some aspects of compensation should be calculated.

In employment claims employees may be entitled to compensation for injured feelings as well as other compensation. The award is intended to compensate for hurt, humiliation and degradation suffered by an employee. Employers should be aware that:

  • The Vento bands provide guidance as to the amount of compensation that should be awarded for injured feelings according to the seriousness of the hurt feelings. The bands were first set out by the Court of Appeal in the case of Vento v Chief Constable of West Yorkshire Police (2002).
  • In Vento, the court identified three broad bands for injury to feelings awards: the lower, middle and upper bands. 
  • Employment Tribunals are not completely bound by the Vento bands, but they must have regard to them in making an award for injury to feelings.
  • In normal personal injury claims a 10% uplift also applies. This applies to compensation for injury to feelings and psychiatric injury awarded in discrimination cases. This uplift was established by the Court of Appeal in a 2012 case Simmons v Castle.

As a result of all these related cases further Tribunals’ President’s guidance was given. There is now annual inflation linked adjustment of the compensation bands and incorporation of the 10% uplift. The guidance provides for new bands in respect of claims after 6 April 2018,  ranging between £900 to £8,600 for less serious cases, and an upper band of up to £42,900 for the most serious cases.

[2016] UKEAT/0021/16/DM
Issue: Deposit orders

An employee who was a victim of trafficking, alleged she was employed in circumstances that amounted to slavery. She brought various employment tribunal claims including race discrimination against her former employers. The Employers tried to stop the claims by seeking deposit orders of £75 each on the basis that the allegations had little reasonable prospect of success.

Decision

The former employee argued that the amount of the deposit orders was an error of law because she had no ability to pay them. The effect of the deposits was to prevent her from accessing justice. The EAT agreed and reduced the amount of the deposits to £1 per allegation. The Court provided some useful guidance about the approach when considering an application for a deposit order:

  • The purpose of the order is to identify claims that have little prospect of success, not to make it difficult to access justice.
  • The employment judge must make a summary assessment of the case rather than hearing detailed evidence. If there is a core factual conflict between the parties, then it is unlikely that a deposit
    order will be made.
  • If an employment judge is minded to make a deposit order, there must be enquiries into the employee's ability to pay.
  • The amount payable must be proportionate and not restrict the employee’s right to a fair trial.

Implications for employers

This is an important case for employers who are sued by employees who have low means or a weak case.

Employers can try and have weak claims struck out entirely, but this is hard to achieve. A more cost-effective method to halt an unreasonable claim may be to apply for a deposit order. A deposit order may be sought when a claim (or part of a claim) has little prospect of success. The employment judge can order the employee to pay a up to £1,000 to in order to allow the claim to continue:

  • If the deposit is not paid, the allegations about which the deposit order has been made will be struck out.
  • If the deposit is paid and the employee's claim later fails at a full hearing (for reasons stated in the deposit order) the employee will then be at risk of paying costs.

If an employee has very limited resources and is vulnerable it may be disproportionate to order a high sum by way of a deposit. Larger sums can amount to a strike out if the employee has no means of paying it.

Employee who have limited means, and therefore a lower deposit order may still think twice, as deposit applications do tactically highlight the weakness of a claim to the employee and puts them at risk of costs if their claim fails.

Employers should always consider the overall prospects of success of the claim, and the merits and costs of making a deposit order application.

​ET/1601342/14
Issue: Acas early conciliation – claimant had failed to participate

An employee of the Nationwide Building Society brought a claim (on form ET1) about a detriment for making a protected disclosure (a whistleblowing claim). Her solicitors did not get an early conciliation certificate number but (wrongly) stated that the claim was exempt from early conciliation.

The employer said that the ET1 should have been rejected as the employee should have undertaken early conciliation. Her solicitors accepted that the claim was not exempt from early conciliation as they had said on the form. However, they tried to get the proceedings stayed so that the employee could commence early conciliation retrospectively.

Before the matter was resolved, the employee had contacted Acas, submitted her early conciliation application and obtained a certificate of compliance. It had to be decided if she could proceed with the claim although she had only retrospectively complied with the early conciliation requirements. It was in her interests to proceed with the original claim because there were issues about time limits which made it advantageous to pursue the original claim.

The Employment Appeal Tribunal therefore held that her claim should not be rejected as the rejection was based on a defect that had since been rectified, now that she had the certificate. The claim form could be treated as if it had been presented at the time the early conciliation procedure had finished.

Implications for employers

  • New early conciliation procedures were introduced on 6 May 2014 requiring that employees must get a certificate before being able to proceed with their claim in an employment tribunal.
  • This case is one of the first to consider the early conciliation rules which aim to encourage the parties to consider settlement at an early stage.
  • Employers should examine the details of the claim form carefully, checking time limits and conciliation issues. If the claim should not have been accepted in the first place, this should be raised without delay with the employment tribunal.
  • However, raising technical points as in this case will increase employers' legal costs.
  • If an employee fails to follow Acas early conciliation this does not necessarily stop the claim being pursued in the employment tribunal.
  • An employer may win a challenge to the validity of a defective claim, but if there is sufficient time before the time limit expires, the employee may be able to rectify the defect.
  • The employment tribunal can use the re-consideration provisions of the employment tribunal rules to treat the claim as having been presented at the end of early conciliation, even though conciliation was only started after the original claim was filed.
  • Employees can therefore effectively rectify some defects in an ET1.
  • A defective claim like this one will be rectified when the early conciliation certificate is finally issued with the early conciliation number.
  • An employee with a defective claim can therefore avoid paying a second issue fee.

[2014] UKEAT 0488/13/1606
Issue: In house lawyer costs 

Facts

There was an award of costs made against an employee because of his unreasonable behaviour in bringing the claim. The costs incurred by the employer were for all the work undertaken by the in-house lawyer in defending the claim. The definition for costs in the tribunals rules says "fees, charges, disbursements or expenses incurred by or on behalf of a party". The employee said this did not cover time spent by an in-house legal team and the legal costs could not be awarded against him. 

Decision

The EAT said the employer was right and the costs were recoverable. Employers can recover costs for time spent by a qualified in-house representative. The Employment Judge had also properly addressed the question whether it was proportionate to award the whole of the costs.

Implications for employers

Legal costs of some employment claims in the civil or appeal courts can be recovered by the winning side. This is not usually the case in the employment tribunal. Costs awards are only made very rarely in the tribunal. When costs can be recovered, employers need to be aware which costs can be claimed.

Many larger employers have an in-house lawyer, and it was not clear until this case which costs, if any, could be recovered. The case confirms that an employer’s legally qualified in-house lawyer can claim costs incurred during tribunal claims. Employers with in-house legal departments should be aware that:

  • In-house lawyers seeking the cost of their time from the employee should keep detailed records of the work they are doing and the time they spend.
  • Some larger in-house teams may adopt time recording procedures in order to recover their potentially chargeable time.
  • Legal costs are only recoverable if they are reasonable and proportionate. 
  • In cases where costs are recoverable, it may be more cost-efficient to instruct external solicitors to increase the possibility of legal costs being recovered.

Legal costs can also be recovered if the employer has used other advisors for 'legal work'. When costs are recoverable, the tribunal rules also allow employers to recover the costs of even a lay representative who charges for representation. Work which is secretarial or administrative, rather than legal, cannot be claimed.

​[2012] UKSC 1
Issue: Employment tribunals – jurisdiction

A UK national who lived in Great Britain was employed by a British subsidiary of the Halliburton group. He worked for 28 working days in Libya, then 28 days home in Great Britain. The work in Libya was for a German part of the group of companies, but he reported to management in Egypt. The relevant human resources departments were in Great Britain and Libya. He was on his British salary and benefits package and paid in sterling into his British bank account, He also paid British income tax and national insurance contributions.

He was made redundant and claimed unfair dismissal in the British employment tribunals. The Supreme Court eventually held that Great Britain had jurisdiction to hear his claim on the basis that the substantial connection between his employment and Great Britain brought the claim within the scope of the Employment Rights Act 1996 (ERA 1996).

Implications for employers

  • There are no longer any provisions in the ERA 1996 which limit the territorial extent.
  • Therefore employers with employees working overseas whose employment has a substantial connection with Great Britain can be presumed to fall within its scope.
  • The leading case of Lawson v Serco Ltd [2006] IRLR 389 identified categories of employees falling within the scope of the ERA 1996: employees posted abroad for the purpose of a business carried on in Great Britain; mobile employees whose base is in Great Britain; and employees working in a British enclave overseas, for example at a British diplomatic mission or military base.
  • This case and previous decisions show that there is another category of employment, namely those with a ‘substantial connection’ to Great Britain.
  • Employers with staff who carry out all their work outside Great Britain can still bring claims of unfair dismissal in Great Britain if there is a ‘substantial connection’ to Great Britain.
  • The ‘substantial connection’ can be based on numerous surrounding factors even in the private sector.
  • It is hard for employers to predict if there is British jurisdiction in any particular factual scenario, so if employers wish to choose or avoid British jurisdiction they should consider including an express choice of law and jurisdiction in the contract of employment.

[2011] EWCA civ 1255
Issue: Legal costs in the tribunal

Facts

A teacher brought multiple claims of race, sex and disability discrimination against her employer, Barnsley Metropolitan Council. After long proceedings, including applications, case management discussions and part of a three day Pre Hearing Review (PHR) in which she withdrew her claims, citing that she felt worn down by conducting the case in person. She also complained about the unreasonable conduct of the Council’s representative and the complexity of the case. 

By that stage, the Council’s legal costs were approximately £92,500 and the Council applied for costs based on the fact that the Claimant had not been truthful about the extent of her disability, the existence of a personal injury claim and had lied about her financial means.

Decision

The Court of Appeal agreed that her conduct was unreasonable and that this warranted a cost order being made against her. It said the earlier ET cost award of 100% of the employer’s costs was inappropriate and should be limited to the employer’s costs incurred challenging the  assertions regarding her disability. It reduced the level of the award to 50% due to the employer’s heavy handed approach in the proceedings.

Implications for employers

Employers who are sued in employment claims in the ‘normal’ civil courts or the Employment Appeal Tribunal and win may recover a proportion of their costs. The rule is that the unsuccessful party pays a proportion of the winning party’s legal costs. In a tribunal claim the position is different. The parties normally pay their own costs in tribunals. 

Employers should remember that they may apply to recover legal costs in the tribunal where the employee, or their representative, has acted vexatiously, abusively, disruptively, or otherwise unreasonably, or that the bringing or conducting of proceedings has been misconceived.  Cost awards are rarely granted although tribunal judges do have a discretion to make up their own mind.

This case gives guidance to employers considering whether to seek costs from unreasonable litigants:

  • Employers should review their own conduct in proceedings to ascertain the merits of making a costs application, as this is likely to be taken into account and could reduce the size of any award.
  • Any award of legal costs against an employee must, at least broadly, reflect the effect of the conduct in question on the employee. So if the unreasonable behaviour, for example a lie, did not have an effect on the employer’s legal costs, then costs are less likely to be awarded. 

UKEAT/0139/10
Issue: Employment tribunals – mitigating loss

A lecturer who was a US citizen was dismissed due to her employer’s mistaken belief that they were illegally employing her once her work permit had run out. (Her leave to remain in the UK had expired and the university was concerned that it might be employing her illegally. However in the meantime she applied for indefinite leave to remain in the UK which was granted.) The dismissal was found to be unfair and wrongful and the case was sent back to an employment tribunal for an assessment of her compensation.

The tribunal and the Employment Appeal Tribunal held that the lecturer had failed to mitigate her losses by not applying for either of two vacant posts in the department where she had previously worked and a number of posts at other universities which she had identified. It concluded that she would have been appointed to one of the two posts by June 2005 had she applied and therefore her loss of earnings should be up to that date. The employer was correct in insisting that she applied for the two vacant posts through the proper channels and if she had,she was very likely to have been successful in being appointed to one of the posts.

Implications for employers

  • Employers must at the very least ensure that all employees have permission to work in the UK. If this permission is temporary, employers may wish to keep abreast of their employees’ immigration status before problems arise rather than afterwards.
  • Employers should retain evidence showing internal vacancies which the employees in such circumstances could apply for.
  • It is for the employer to establish that an employee has not taken reasonable steps to alleviate the loss and so employers should always be prepared to show that employees have failed to mitigate their loss so any award can be reduced.

UKEAT/0227/09
Issue: Injury to feelings compensation

Facts

Mrs Da' Bell succeeded in a disability discrimination claim and was awarded £12,000 for the employer's failure to make reasonable adjustments. A key issue was whether the figure should be adjusted for inflation.

Decision

The Employment Appeal Tribunal revisited the three broad bands of compensation for injury to feelings awards which had been used by the courts and tribunals for eight years and needed to be uprated for inflation. The bands were set in this case as follows:

  • The lower band for less serious cases raised to between £600 and £6,000.  
  • The middle band for serious cases that did not merit an award in the upper band was raised to between £6,000 and £18,000.
  • The upper band for the most serious cases raised to between £18,000 and £30,000.
  • Exceptional cases may exceed the upper limit.

Implications for employers

If an employer is settling an employment dispute with a claim for injury to feelings it must check what a tribunal might currently award for injury to feelings. Discrimination claims under the Equality Act 2010 compensation may include injured feelings compensation as well as other compensation too.

Employers should always check that what an employee is claiming is in line with current guidance. The compensation bands, having been fixed for many years, will now be updated every year to reflect inflation.

Following this case the Presidents of the Employment Tribunals have given updated guidance on appropriate awards to reflect changes in inflation. Taking into account the RPI from 2018 the new bands for injury to feelings awards are as follows:

Lower band: £900 - £8,600
Middle band: £8,600 - £25,700
Upper band: £25,700 to £42,900
Exceptional cases £42,900 +

The compensation bands are known as “Vento bands” which is a short-hand for HR practitioners when evaluating proposals for settlement of possible tribunal claims. Vento was the important original case in which the Court of Appeal set out the three bands of compensation. Employers should be aware that:

  • The bands are only for injury to feelings awards, not the more flexible compensation awards for psychiatric or similar personal injury. 
  • Further cases and guidance is relevant when negotiating compensation. Injury to feelings awards should follow civil courts by awarding a further 10% uplift on the Vento bands. This is to echo other changes in personal injury litigation.
  • There is other legislation regarding taxation of injury to feelings awards, in summary where the award is connected to a dismissal, it is taxable; where it relates to events before the termination, there is no tax payable.  (See the Finance (No2) Act 2017.) 

Employers must keep up to date with other compensation changes. Injury to feelings awards might also apply in claims of unlawful detriment.

Daleside Nursing Home Ltd. v Mathew | Employment Appeal Tribunal | 18 February 2009

[2009] UKEAT 0519/08/1802
Issue: Legal costs in the tribunal

Facts

Mrs Mathew brought a direct race discrimination, unfair dismissal and wages claims against the nursing home where she had worked. The key part of the race discrimination claim was an allegation that a manager had called her a ‘black bitch.’ The tribunal believed the manager’s denial that she had said this. On the basis of the lie, the employer applied unsuccessfully for its costs, and appealed to the EAT.

Decision

The EAT held that the race discrimination claim had been based on a deliberate and cynical lie and she had made up a serious allegation of racial abuse. The EAT said the tribunal was wrong to refuse costs, since bringing a claim based on a lie was unreasonable conduct. The costs for which the employee could be liable were reported to be about £25,000.

Implications for employers

Costs are not usually awarded to the employer if they are winning party in a tribunal claim. However, employers may be able to recover costs when a case is brought unreasonably. One example of unreasonable behaviour is lying. Employers should be aware that:

  • Costs orders are rare-tribunals will not award them unless they can be reasonably sure that a claim was not brought in good faith. 
  • Although lying is unreasonable conduct, Employment Judges will take into account the seriousness  of the conduct in deciding whether to make a costs award at all; and what the amount of the
    award should be. 
  • Lies do not always mean that the claim was wholly misconceived from the start.

Employers should keep any clear evidence of wrongdoing, in order to try and claim costs. Many employees cannot afford  to pay a costs order if one is made, and the tribunal may take means into account when deciding whether to make an order and when setting the amount. 

[2007] EWCA Civ 1342 
Issue: Legal costs in the tribunal

Facts

Mr Khan, who had been a teacher, brought a case against the local education authority alleging race and disability discrimination. His claim was ultimately struck out after hearings that took place over a period of 49 days, interrupted by numerous adjournments spread over three years. The employee had conducted a campaign to force the Tribunal Chairman to step down on the grounds of bias, which was not established.

By the time the matter reached the Employment Appeal Tribunal and the Court of Appeal the key issue was the final costs order. This was for 80 per cent of an estimated £100,000 bill for the Kirklees Council's costs in resisting the application. The EAT described the Claimant as “by some distance,  the most obdurate, recalcitrant and openly contemptuous party that any of us have ever had to deal with.” 

Decision

The Court of Appeal agreed that the order for 80 per cent payment of cost should remain in place.

Implications for employers

Although legal costs are not normally recoverable in the employment tribunal, if proceedings have been conducted unreasonably, the tribunal can make an order for legal costs against the employee. Defending any Employment Tribunal claim, whether or not it has merit, is expensive for employers both in terms of legal costs, management time and potentially negative publicity. 

Employers can ask a Tribunal to strike out a claim if it has no reasonable prospect of success, or has been conducted by a Claimant in a scandalous, or unreasonable manner. Not many cases are struck out though.  

Employers should remember that:

  • Tribunals can 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.
  • They can give an employee a costs warning before making a formal costs application. Sometimes, tactically, a costs warning is combined with a commercial settlement offer that, if the employee refuses the settlement offer and then loses their claim, or is awarded lower compensation, the employer may seek their legal costs.
  • Employers must not make unreasonable costs warnings.
  • Tribunals can take into account a Claimant’s financial means when assessing what costs to award.

[2003] IRLR 102 
Issue: Injury to feelings compensation

Facts

A probationary constable with the West Yorkshire Police brought a sex discrimination claim. After her marriage broke down her superiors had an unprofessional interest in her private life, bullied her and subjected her to sexual harassment. At the end of her probationary period she was dismissed. One of the main reasons given was that she gave a dishonest response to a superior.

The main issues in the case concerned what percentage chance she would have had of completing a full police career and therefore how much she had lost financially. There was also dispute about the level of compensation for injury to feelings. The EAT had awarded £30,000 for this element but the employment tribunal thought she deserved more, £65,000 for the damage to her feelings. 

Decision

The Court of Appeal decided that the decision that she had a 75 per cent chance of completing a full police career should not be changed. However, the award for injury to feelings was excessive and the court said £32,000 was appropriate. This included £18,000 for injury to feelings, £5,000 for aggravated damages and £9,000 for psychiatric damage.

The court set out three broad bands of compensation for injury to feelings. This is distinct from psychiatric or similar personal injury. The bands were: 

  • Lower band: between £500 -£5,000 for less serious cases, such as where the act of discrimination is an isolated or one-off occurrence. 
  • Middle band: between £5,000 and £15,000 for serious cases, which do not merit an award in the highest band. 
  • Top band: covering the most serious cases, should normally be between £15,000 and £25,000. 
  • Exceptional cases: in excess of £25,000. 

Awards under the lower band value are inappropriate as they could be regarded as being so low as to not recognise injury to feelings.

Implications for employers

This case became the important benchmark for compensation for injury to feelings. The compensation bands are now known as “Vento bands”. HR practitioners and legal advisers can follow this structure when evaluating proposals for settlement of claims with injury to feelings elements. 

The compensation bands, having been fixed for many years at the level set out in the original case are now updated every year to reflect inflation.

Employers should always check current guidance from the Presidents of the Employment Tribunals. Taking into account the RPI the 2018 Vento bands for injury to feelings awards were:

Lower band: £900 - £8,600
Middle band: £8,600 - £25,700
Upper band: £25,700 to £42,900
Exceptional cases £42,900 +

Employers should be aware that the bands are only for injury to feelings awards, not the more flexible compensation awards for psychiatric or similar personal injury.

Other uplifts apply to compensation as well for example a 10% uplift on the Vento bands to reflect other claims in the civil courts.

Employers should also be aware of rules on taxation of injury to feelings awards, which differ according to whether a payment for injury to feelings is related to the termination of employment. It is important to ensure that any settlement agreements entered into state precisely what a payment represents. If a payment is not related to termination, then the compensation can be paid tax free. However, from 6 April 2018 payments for injury to feelings for discrimination connected with termination are taxable. The tax-free exemption for personal injuries does not apply (except where the injury amounts to a proper psychiatric injury).

​Please note: While every care has been taken in compiling these notes, CIPD cannot be held responsible for any errors or omissions. These notes are not intended to be a substitute for specific legal advice.

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