News & Views

Dealing with Disgruntled Former Employees

This blog focuses on how employers can deal with litigious/vexatious former employee who bring claims in the Employment Tribunal following the termination of their employment.

As a result of the abolition of Employment Tribunal fees, it is a lot easier for employees to bring claims. Whilst some claims have clear merit, others are started in the hope that the employee will receive a nuisance settlement or because he or she wants to cause as much harm as possible to their ex-employer.

The thought of defending an Employment Tribunal claim can strike fear in to employers for obvious reasons. So what options are available in such situations?

  • Look into getting legal expenses insurance

Having insurance to cover your legal fees (“costs”), should you be faced with a claim in the future, could provide you with comfort that the costs involved in defending the claim will be picked up by the insurer.  This is because costs are rarely recoverable from the ex-employee if you succeed. This is not an option even if you are currently defending an Employment Tribunal claim.

Be warned, however, that you need to look at the small print. There are different insurance packages available and you have to be mindful of the terms of the insurance. For instance, the majority of insurers will only provide cover where it is proportionate to do so – in other words, if the costs are likely to be more than the compensation claimed, the insurers may withdraw their cover. However, if you get the right cover, you can robustly defend your position without the fear of incurring costs.

  • Consider an application to strike out/ for a deposit order

Employment Tribunals have the power to strike out a claim where it has no reasonable prospects of success. A strike out application would be considered at a preliminary hearing and is a basis upon which the proceedings can be stopped at the earliest opportunity if successful.

If a Tribunal is unwilling to strike a claim out, it can order the ex-employee to pay a deposit of up to £1,000 where it considers that the claim has little reasonable prospect of success. The ex-employee cannot continue with their claim until the deposit order is paid into the Tribunal, and they forfeit that deposit if they lose their claim.

  • Make a nuisance / commercial offer

Whilst it may be unpalatable to make an offer to an ex-employee who you consider is making a claim vexatiously, the reality is that defending a claim is costly if you use lawyers. In addition, the Tribunal system is currently overwhelmed with claims, the process could take over a year to conclude.

In light of this, you might consider making a nuisance offer at an early stage in an attempt to settle the dispute so that you avoid the costs and the management time. Should this be successful, you can insist that any settlement agreement is made on a without admission of liability basis and contains confidentiality provisions.

However, such a tactic would only be successful if the claimant was reasonable. If you are faced with a claimant who has unrealistic expectations of what compensation they could achieve, a settlement may be a futile option.

  • Make a costs warning

Although costs are rarely awarded to the successful party in the Employment Tribunals, the Tribunal does have a limited power to award costs in cases where a claim has limited prospects of success and the other party was warned that a costs application would be made if they were unsuccessful. This can be a useful tactical step in applying pressure on the ex-employee if they are aware that their claim is spurious. However, in some cases, a costs warning would not be appropriate and also bear in mind that even if costs are awarded, it does not follow that the ex-employee will be able to repay those, and you may not be able to enforce payment.

There is not a one size fits all answer in such cases. What is the best approach is a matter of judgement and should be assessed taking into account the individual in question, the complaints alleged and the potential risks to the business.

If you require assistance in such matters, please contact Mark Fellows a member of the employment team.

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