There is nothing more frustrating for employers than managing an unfair dismissal case when the employer feels they have done everything by the book.

The reality is that any aggrieved employee can file an unfair dismissal claim, regardless of the merits. The barriers to entry for an unfair dismissal case are very low: an application can be filed for around $70.

With employers facing the uncertainty of defending a claim (including the cost, stress and time associated with it), many businesses opt for settling the claim as quickly and cost effectively as possible (something which is frequently described as paying ‘go away’ money).

However, it takes two to tango, and it’s not always possible to settle claims on reasonable terms, particularly where the former employee takes an unreasonable approach and demands the maximum compensation of six months’ pay, or is hell bent on having their day in court.

This puts employers in a difficult position, even where the complaint lacks any obvious merit. Faced with the prospect of incurring significant legal fees in defending the claim, employers understandably ask whether they can get costs paid if they win.

What are the circumstances where you can get costs paid?

The general rule is that parties in matters before the Fair Work Commission must pay their own costs.

However, in certain (limited) circumstances the Commission can depart from that general rule and order a party to pay some of the other party’s costs.

The Commission has discretion to make costs orders where it considers that:

• A party has acted unreasonably, thereby causing the other party to incur costs;
• A party has made an application vexatiously or without reasonable cause; or
• It should have been apparent to the party that the application had no reasonable prospects of success.

However, even where one of the above requirements is established, the Commission still has the discretion not to award costs if it does not consider it appropriate.

Winning a costs application

“When faced with an applicant who is determined to go to court, the employer should make numerous settlement offers.”

When faced with having to defend an unfair dismissal claim which you consider to be baseless, there are several things that can be done to help a successful costs application.

• In an unfair dismissal case where an employer makes a reasonable settlement offer and the offer is rejected by the applicant, this can provide evidence of the party acting unreasonably. For this reason, when faced with an applicant who is determined to go to court, the employer should make numerous settlement offers at strategic times to demonstrate the applicant’s unreasonableness.
• Settlement offers should be made on a ‘without prejudice save as to costs’ basis. This means the offer is privileged and generally cannot be used as evidence in the proceedings, but can be relied upon in any subsequent costs application once the matter has been determined.
• Employers should file evidence which unequivocally highlights the lack of merit in the applicant’s complaint. This can help to show either that the application was made without reasonable cause or merit, or alternatively, that it should have become apparent at the time the employer’s evidence was filed.
• During an unfair dismissal case, employers should aim to be squeaky clean when asking for a costs order, which means not having acted unreasonably or caused any delay yourself. Adopting strategies that delay or frustrate the progress of the case will damage your chances of a favourable costs order.
• Even where costs orders are successfully obtained, employers will almost never be able to recover all of their costs. There are limits on the amount that can be awarded, so it’s important to avoid incurring unnecessary legal costs.

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