Mihailescu v Better Lives (UK) Ltd (t/a Bluebird Care)

An Employment Tribunal may award costs only after it has correctly found a threshold circumstance under rule 76(1) of the Employment Tribunal Rules of Procedure 2013. The threshold, discretion whether to award costs, and amount are separate stages.

Unsuccessful claims do not necessarily lack reasonable prospects, and a litigant in person does not act unreasonably merely by pursuing proceedings that include unmeritorious matters where substantial claims were properly brought and succeeded in part. In exercising any costs discretion, the Tribunal must take account of all material circumstances, including the respondent’s conduct, the absence of a deposit order where relevant, and the need to pursue a claim that the respondent did not concede before the merits hearing.

The Claimant, a care worker, brought claims including contractual payments, holiday pay and pay slips after the Respondent ceased providing work. The Respondent initially denied that he was either an employee or a worker. At a preliminary hearing, the Employment Tribunal found that he was an employee.

At the merits hearing, the Tribunal dismissed most claims but awarded holiday pay of £2,498.47 gross. It later ordered the Claimant to pay £5,000 costs, finding that most claims had no reasonable prospects of success and that he had acted unreasonably in bringing and conducting the proceedings.

The Claimant appealed the costs order. The central issue was whether the rule 76 threshold for a costs order had been met and, if so, whether the Tribunal had properly exercised its discretion.

1. Appeal allowed. The Employment Tribunal erred in law in finding that the threshold for a costs order was met. The Employment Appeal Tribunal substituted a decision that there was no discretion to award costs and set aside the £5,000 order.

2. Under rule 76(1) of the Employment Tribunal Rules of Procedure 2013, the Tribunal must first establish a qualifying threshold circumstance. It must then separately decide whether to exercise its discretion to award costs, and only then determine the amount. The Tribunal did not identify claims that had no reasonable prospects of success with sufficient accuracy.

3. Matters raised only in correspondence under the Data Protection and health and safety legislation were not formal claims. They could not found a conclusion that claims had been pursued without reasonable prospects. The contractual claim required factual determination and was not shown to have lacked reasonable prospects merely because it failed. The holiday-pay claim succeeded.

4. The Claimant was not unreasonable in pursuing the issue arising from the zero-hours term. The earlier status decision had not analysed whether the term reflected the reality of the relationship or determined how it ended. A zero-hours contract does not itself preclude termination.

5. In any event, the costs discretion was affected by material matters which the Tribunal had not addressed. These included the Respondent’s unsuccessful and arguably unreasonable resistance to employee status, its late concession of holiday pay, and the absence of a deposit order. The award was also insufficiently explained, particularly given that the Claimant had to proceed to a merits hearing to recover holiday pay.

• Employment Appeal Tribunal: allowed the Claimant’s appeal and set aside the Employment Tribunal’s £5,000 costs order: [2019] UKEAT 0184_19_1411.
• Employment Tribunal: after dismissing most substantive claims but allowing holiday pay, awarded the Respondent £5,000 costs. The citation of the costs judgment is not stated in the judgment.