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Employment Tribunal Costs Orders
Rad Kohanzad represented the claimant in QR v The G.I. Group Ltd [2025] EAT 178, an appeal concerning an alleged oral settlement agreement and a £10,100 Employment Tribunal costs order. The EAT rejected the challenge to the Tribunal’s finding that no binding contract had been concluded, and upheld its decision that costs could be awarded for unreasonable procedural applications. However, it allowed the appeal against the amount of costs, finding that the Tribunal had not properly assessed the claimant’s individual ability to pay or adequately explained how it calculated the award. The costs decision was remitted for reconsideration.
Background: an alleged oral settlement agreement
The claimant had worked for The G.I. Group Ltd since 2011. Following a flexible-working request, grievance and related discussions, a meeting took place on 6 December 2022 at which the parties agreed several proposed settlement terms. These included a payment of £40,000 and the termination of her employment by mutual agreement.
However, other matters remained unresolved. In particular, the parties disagreed about a restrictive covenant, and the terms of a reference still needed to be settled. The claimant understood that a written agreement would be prepared and that she would need independent legal advice before a binding settlement agreement was concluded. Negotiations subsequently broke down, and the employer withdrew its offer.
The claimant later brought an Employment Tribunal claim alleging, among other matters, breach of contract on the basis that the parties had already reached a binding oral agreement to pay her £40,000.
The Employment Tribunal rejected that claim at a preliminary hearing, finding that the parties had agreed elements of a settlement but had not reached a complete, binding agreement. Following procedural applications made on the claimant’s behalf during the hearing, the Tribunal also ordered her to pay £10,100 towards the employer’s costs.
The claimant appealed both decisions.
1. Was there a binding oral settlement agreement?
The first issue was whether the Employment Tribunal had wrongly treated the statutory requirements for a valid settlement agreement as requirements for any binding contract.
Section 203 of the Employment Rights Act 1996 restricts the ability to contract out of statutory employment rights. For an agreement to waive relevant employment claims, the statutory conditions include that the agreement be in writing and that the employee receive advice from an appropriately qualified independent adviser.
Those requirements do not mean that every contract between an employer and employee must be written. An oral agreement can, in principle, be contractually binding. The question is whether, objectively assessed, the parties reached a complete agreement that they intended to be legally binding.
Rad argued that the Tribunal had conflated the statutory requirements for a settlement agreement with the common-law question of whether a binding contract had been formed. He submitted that the oral agreement reached on 6 December was binding, even though a further written agreement was contemplated.
The EAT accepted the legal distinction Rad relied on, but rejected the argument that the Tribunal had misunderstood it. Reading the Tribunal’s reasons fairly and as a whole, the Judge had considered whether the parties intended to be bound at the meeting, taking account of their understanding that the agreement would be put in writing and that the claimant would receive independent legal advice.
The unresolved restrictive covenant and reference terms also supported the conclusion that the agreement was incomplete. The EAT rejected the argument that the parties had entered into two separate agreements—one binding oral contract and a later, unfinished settlement agreement. It also rejected the suggestion that an implied duty to negotiate in good faith could fill the gaps in the alleged oral agreement.
The appeal against the breach-of-contract decision was therefore dismissed. The EAT did not decide that oral agreements can never be binding; it concluded that the Tribunal was entitled to find that these parties had not intended to be bound until the proposed written agreement and legal advice requirements had been completed.
2. When can an Employment Tribunal award costs for procedural applications?
The second part of the appeal concerned the Tribunal’s decision to award costs following applications made during the preliminary hearing. These included applications to strike out the employer’s response, obtain disclosure and postpone the hearing.
Under Rule 76(1)(a) of the Employment Tribunals Rules of Procedure 2013, a costs order could be made where a party or their representative had acted vexatiously, abusively, disruptively or otherwise unreasonably in bringing or conducting proceedings. Rule 76(1)(b), by contrast, concerned a claim or response having no reasonable prospect of success.
The distinction matters: an unsuccessful procedural application is not itself a claim or response within Rule 76(1)(b). The relevant question here was whether making the applications amounted to unreasonable conduct under Rule 76(1)(a).
Rad challenged the Tribunal’s approach, arguing that it had focused on whether the applications had reasonable prospects of success rather than properly determining whether the claimant or her representative had acted unreasonably. He also argued that the Tribunal should have considered whether the representative’s conduct could fairly be attributed to the claimant.
The EAT dismissed these grounds. It concluded that the lack of prospects of success was centrally relevant to the allegation of unreasonable conduct in this particular case, and that the Tribunal’s reasons, read fairly and as a whole, did not establish that it had applied the wrong legal test.
The EAT also recognised that a Tribunal may, in appropriate circumstances, need to investigate whether unreasonable conduct was actually the responsibility of a representative rather than the party. But there is no duty to investigate in every case. Here, the claimant had been present, had been copied into the relevant application and had not distanced herself from her representative’s actions. The EAT found no sufficient cause for concern requiring the Judge to investigate further.
Accordingly, the EAT upheld the decision that the threshold for a costs order had been met and that the Tribunal was entitled to exercise its discretion to award costs.
3. Why the £10,100 costs order was overturned
The claimant succeeded on two grounds relating to the amount of the costs order.
The Tribunal had to focus on the claimant’s own ability to pay
Rule 84 of the 2013 Rules permitted the Tribunal to take account of the paying party’s ability to pay when deciding whether to award costs and, if so, how much. The Tribunal had considered the claimant’s financial circumstances alongside her husband’s disposable income, but ultimately referred to their joint income when setting the award.
The EAT held that, if a Tribunal chooses to take ability to pay into account, the focus must remain on the paying party’s own ability to pay. Another person’s resources may be relevant, but only to the extent that they affect that party’s ability to pay.
Financial dependence on a spouse does not necessarily mean that all of the spouse’s disposable income is available to meet a costs order. The Tribunal’s reasons did not show that it had properly assessed how the husband’s resources affected the claimant’s own ability to pay.
The EAT did not impose a requirement to calculate an exact share or percentage of household income in every case. The essential requirement was that the decision demonstrate that the Tribunal had considered the correct question. It had not done so here.
The Tribunal had not adequately explained how it arrived at the figure
The Tribunal had referred to the employer’s legal costs, the time spent dealing with the applications and the claimant’s joint household income. But it did not explain how those factors produced an award of £10,100.
A costs assessment does not have to be a detailed calculation, and a broad-brush approach is permissible. Nevertheless, the reasons must give the parties a sufficient explanation of how the amount was determined.
The EAT could not tell whether £10,100 represented the costs attributable to the procedural applications, a reduction based on the claimant’s means, or a broader assessment of what she should pay towards the employer’s overall costs. The Tribunal’s explanation was therefore inadequate.
The EAT allowed both grounds and overturned the £10,100 costs order. It remitted the question of costs to the same Employment Judge to reconsider in light of its judgment. The claimant did not thereby become automatically liable for no costs: the Tribunal was to reconsider the costs decision, applying the correct approach.
Key legal points
An oral agreement can be binding, but completeness and intention matter. The statutory requirements for a settlement agreement are distinct from the common-law test for contract formation. The parties’ words, conduct, understanding and the outstanding terms must be assessed in context.
The costs rules distinguish between unreasonable conduct and a claim with no reasonable prospect of success. The latter concerns the claim or response, whereas unreasonable conduct under Rule 76(1)(a) can include procedural applications.
A Tribunal may need to consider whether unreasonable conduct was the representative’s responsibility. But there is no universal duty to investigate a representative’s authority; the need for further inquiry depends on the circumstances.
If ability to pay is considered, the focus is the paying party’s own resources. Other people’s finances can be relevant where they affect that person’s ability to pay, but household income should not automatically be treated as wholly available to the claimant.
Costs reasons must explain the amount awarded. A broad-brush assessment is permitted, but the Tribunal must still provide enough explanation for the parties to understand how it arrived at the figure.
What this case means if you are appealing a costs order
This case is particularly relevant if an Employment Tribunal has ordered you to pay costs and has considered your financial circumstances when determining the amount.
An arguable appeal may arise where the Tribunal has treated a spouse’s or another person’s resources as if they were automatically available to the paying party, without considering how those resources affect that party’s actual ability to pay. A challenge may also be available where the Tribunal gives no adequate explanation for the amount awarded.
However, QR v The G.I. Group Ltd does not mean that every costs order based on household finances is unlawful, or that a Tribunal must produce a detailed mathematical calculation. Nor does it mean that an unsuccessful application cannot amount to unreasonable conduct. The appeal succeeded because of specific defects in the Tribunal’s assessment of the amount, while the EAT upheld its decision that costs could be awarded in the first place.
If you have received an Employment Tribunal costs order, I can review the written reasons and advise on whether there may be arguable grounds for an appeal before you decide whether to incur the further costs of pursuing it. If you decide to proceed, I can also advise on and represent you in the EAT.
Read about my Employment Tribunal appeal review and advice service
Case details
Case: QR v The G.I. Group Ltd
Neutral citation: [2025] EAT 178
Judgment date: 8 December 2025
Judge: Michael Ford KC, Deputy Judge of the High Court
Case number: EA-2024-001024-BA
Outcome: Appeal against the breach-of-contract decision dismissed. Appeal against the costs decision allowed on the grounds concerning ability to pay and adequacy of reasons for the amount. The £10,100 costs order was overturned and the issue remitted to the same Employment Judge.
Counsel for the Appellant: Rad Kohanzad.
Counsel for the Respondent: Caroline Musgrave-Cohen, instructed by Tandon Hildebrand.
Official judgment: Read the full EAT judgment (PDF)
