One of the main criticisms of the Tribunal system is that, unlike in a regular court action, costs do not follow success. Unfortunately, this makes it possible for employees to raise claims solely because they are aware that it is more economically viable for the employer to settle the case than to incur the costs of proceeding to Tribunal.

Costs can be recovered in certain circumstances, but this happens so rarely that between 1 April 2010 and 31 March 2011 only 487 costs orders were made, with 355 of these being awarded in favour of the employer. This is a tiny proportion of cases compared to the number that were raised during this period of time (218,000). This is because awards are generally only made when the raising or defending of the claim is found to be misconceived. Even where an award is made, the amount awarded can often fall short of the actual costs incurred by the party – the median award in 2010/2011 was only £1,273 and there is generally a cap of £10,000 on any award.

This makes a recent Tribunal decision to award a record of £100,000 in costs to an employer even more remarkable. Mr Watts had been accused of sexual harassment and victimisation by his former senior executive, Ms Smith. The Tribunal found Ms Smith’s claim to be false and felt justified in using its discretion to order her to pay all of the costs incurred by Mr Watt in defending the claim.

While this decision cannot be taken as a softening of the Tribunal’s approach to costs, nevertheless it does serve as a reminder to employees that there are very significant financial risks associated with raising false or misconceived claims. Indeed, the recent statistics referred to above also serve as a warning to employees in that during 1 April 2010 and 31 March 2011 an award of £83,000 was reportedly made.