Unlike most Civil Court claims, costs are rarely awarded in the Employment Tribunal, even where a claim appears unreasonable or without merit from the outset. This creates a significant burden on Respondents, who must weigh the expense of defending a claim against the near certainty that they will not recover those costs, even if they successfully defend a claim.

The recent case of Madu v Loughborough College highlights the challenges in this area. In this case the Employment Appeal Tribunal (EAT) overturned a costs order against an unsuccessful claimant, providing a valuable insight into the difficulties Respondents face when attempting to recover legal costs.

Mr Madu, a Black British man of African descent, applied for a role at Loughborough College. Two white candidates, one British and one Irish, also applied. Following a scored interview process, the highest-scoring candidate was offered the job, with Mr Madu ranking second.

Believing he had been discriminated against, Mr Madu brought a race discrimination claim in March 2019, initially representing himself. By September 2020, he had secured legal representation, and his solicitors pursued the case to a full hearing in 2021-2022. The tribunal dismissed his claim, finding no evidence of racial bias in the recruitment process, and granted the College £20,000 following their application for costs.

Mr Madu appealed, arguing that the tribunal had erred in its approach. The EAT agreed, quashing the costs order and remitting the matter for reconsideration by a new tribunal. They had found that:

1. Assumptions About Privileged Legal Advice

The Tribunal had speculated that, once Mr Madu obtained legal representation, his solicitors must have advised him that his claim was weak, and that he had unreasonably continued despite their advice. The EAT held this was a fundamental error as  Tribunals cannot make assumptions about confidential legal advice, doing so undermines the principle of legal professional privilege.

1. Failure to Recognise the Challenges of Assessing Discrimination Claims

Discrimination cases often hinge on the credibility of witnesses and hidden motivations, making it difficult for Claimants to assess their prospects of success before hearing the evidence. The Tribunal unfairly expected Mr Madu to foresee the outcome, ignoring the reality that many discrimination claims only become clear after cross-examination. It was equally stressed that hindsight should not be used when judging when a Claimant should have been aware that their case had no prospect of success, with the risk that legitimate claims could be discouraged if tribunals too readily impose costs orders on this basis.

3. Flawed Assessment of Reasonable Belief

It had not been adequately considered that race only needed to be a factor, not the sole reason, in the treatment he received. The EAT noted that some aspects of Mr Madu’s experience, including the vast under-representation of ethnic minorities in the College’s staff and the delays in feedback, could have reasonably supported his perception of discrimination.

1. Inconsistent Treatment

The Tribunal had suggested that Mr Madu, as a litigant in person, should have recognised his claim was hopeless. Despite this, the Tribunal also found that the College, with professional legal advice, could not be criticised for not applying to strike-out the claim. The EAT found this reasoning contradictory, noting that if the claim was so weak, the College could have sought an early dismissal.

This ruling ultimately reinforces the high bar for awarding costs in Employment Tribunals, particularly in discrimination cases where outcomes often depend on contested factual disputes. Although this protects Claimants from being unfairly deterred, it leaves Respondents in a difficult position as there is no guarantee that costs can ever be recovered, and even weak claims can be costly to fight. Whilst the EAT did emphasise the importance of strike-out applications and deposit orders as methods for Respondents to deal with unreasonable claims without a full hearing, these are also time consuming and carry cost implications.

This system incentivises settlement, as employers may choose to pay out, even to meritless cases, to avoid the greater costs of a contentious tribunal battle. This forces a no-win calculation: either pay the legal fees to fight the claim or offer settlement to avoid the drawn-out litigation. As the EAT’s decision in Madu demonstrates, Tribunals will tread carefully when considering costs, in an effort to ensure that Claimants are not penalised for bringing difficult to assess claims. Yet for Respondents, the message is clear: in the current system, winning a case does not always mean escaping financial loss.