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Legal costs awarded against employer in sham redundancy

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Defending an Employment Tribunal claim is not cheap, especially if neither party has the benefit of legal expenses insurance, otherwise legal fees could potentially run into thousands of pounds.

Costs are rarely awarded in the Employment Tribunal and therefore each party usually has to pay their own legal fees.

However a costs application can succeed if a party can successfully argue the other side has no reasonable prospects of success.

Employers should therefore take note of the recent Employment Appeal Tribunal claim of Sunuva Limited v Martin in which Mrs Martin was successful in securing costs on the basis that her employer Sunuva Limited had no reasonable prospects of defending her tribunal claim. Mrs Martin was awarded £17,136.90 in legal costs.

Mrs Martin was an International Sales Manager at Sunuva Limited. In January 2016, the Company proposed a restructure and decided Mrs Martin would be made redundant. A document was prepared by the Company stating Mrs Martin would be made redundant. However, the Company was then advised to undertake a selection process, following which Mrs Martin was made redundant in April 2016.

Mrs Martin brought a claim of unfair dismissal on the basis the redundancy was a sham, namely there was a predetermined outcome to the redundancy selection exercise.

During the Employment Tribunal hearing, a witness for Sunuva Limited admitted there was never any prospect of anyone other than Mrs Martin being selected for dismissal and it had been decided at the outset she would be dismissed.

As a result, the unfair dismissal claim was no longer contested by Sunuva Limited, and Mrs Martin submitted a costs application, which was granted.

Sunuva Limited appealed to the Employment Appeal Tribunal but was unsuccessful.

This case is a useful reminder to employers that their conduct leading up to the dismissal of an employee could have serious repercussions especially if it later transpires the business does not have any reasonable prospects of defending the claim. As well as having to pay for their own legal fees and pay Mrs Martin compensation for unfair dismissal, they have also had to pay her legal fees.

MFG Solicitors can advise on employment rights and help employers carry out their legal duties. For more information about how we could help you, please contact us.