Received a costs warning letter?

A costs threat is not a death warrant for your claim. Here's what it actually means.

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Should I respond to the letter?

Yes. A brief, professional response saying you believe your claim has reasonable prospects and intend to proceed. Keep it on record. If it’s a formal deposit order application, you must respond within the tribunal deadline.

The letter names specific weaknesses in my case. Should I worry?

Maybe. If the weaknesses are genuine, address them — amend your claim or gather more evidence. If they’re speculative or misread your case, respond firmly. Don’t assume the letter is right.

What is the difference between a deposit order and a costs order?

A deposit order requires the claimant to pay money into court as security at an early stage. A costs order is made at the end requiring the loser to pay the other side’s legal costs. Both are uncommon.

If I rejected a Calderbank offer and lose, what happens?

You may be ordered to pay the other side’s costs from the date of the offer forward. If you do better than the offer (win, or win more), the offer has no effect. Get advice before rejecting a formal offer.

Can the employer be ordered to pay my costs if I win?

Rarely. Costs are not normally available to the winning party in tribunals. The tribunal can order the loser to pay your costs only if they acted unreasonably — ignoring orders, making false allegations, or abusing the process.

If I win, can I claim the legal costs I paid?

Not automatically. Tribunals don’t routinely award legal costs to successful claimants. The exception is unreasonable conduct by the employer in the proceedings. Otherwise, your own costs aren’t recoverable.

Received a costs warning letter?

Important: Costs are awarded in under 1% of tribunal cases (MOJ Tribunal Statistics, 2024).

Most claimants who receive costs letters have perfectly viable claims. The letter is designed to make you doubt yourself.

Don't panic or withdraw

The letter is designed to intimidate. Take a breath. Most claimants with costs letters proceed and face no costs order at the end.

Read the letter carefully

Is it a Rule 76 costs application, a Rule 38/39 deposit order application, or a "without prejudice save as to costs" Calderbank offer? Each is different. Note the specific allegations or weaknesses cited.

Consider the substance

Does the letter identify a specific aspect of your claim that genuinely has weak prospects? If so, take that seriously. Consider whether to amend or narrow your claim. If the points are generic scare tactics, ignore them.

Respond calmly in writing

A brief, professional reply stating you believe your claim has reasonable prospects and you intend to proceed. Keep this on the record. Don't be aggressive or emotional.

File it and keep going

Continue preparing your case as normal. The letter will only become relevant at the end if you lose and the employer makes a costs application.

What is a Rule 76 costs order?

Rule 76 Employment Tribunals Rules 2013 allows a tribunal to order the losing party to pay the other side's legal costs if the claimant has "acted vexatiously, abusively, disruptively or otherwise unreasonably" in the proceedings or if the claim was "misconceived."

Key: costs are not ordered simply because the claimant lost. The tribunal must find unreasonable conduct or that the claim was hopeless from the start. Costs can be substantial (£5,000–£50,000+ depending on the legal fees incurred).

Types of costs threat

Formal Rule 76 application

An application to the tribunal asking the judge to order costs. This happens during proceedings or after judgment. Serious but rare.

"Without prejudice save as to costs" — a settlement offer made with notice that if you reject it and do worse at hearing, you'll be penalised in costs. If you reject an offer and then lose, you may be ordered to pay the other side's costs from that date.

General threat letter

Solicitors' letter threatening a costs application. Often vague, designed to intimidate. These are most common and often amount to nothing.

What makes a costs order more likely?

• Unreasonable conduct:
• Ignoring tribunal orders, failing to comply with deadlines, making vexatious claims or allegations
• The tribunal has told you to do something and you refuse or delay unreasonably
• Pursuing hopeless points:
• Points so weak they were hopeless from the start, not just difficult
• Using the proceedings for ulterior motive (harassment, blackmail)
• Dishonesty, contempt, disruptive behaviour in person

What does NOT attract costs

• Simply having a case that fails:
• You lose but you weren't unreasonable in bringing it — no costs
• A case that was arguable but lost:
• Many cases have weak and strong points. If the case overall was arguable (not misconceived), no costs even if tribunal finds against you
• Disagreeing with the tribunal's findings:
• You lose because the tribunal believed the other side — not unreasonable conduct

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Frequently Asked Questions

Should I respond to the letter?

Yes. A brief, professional response saying you believe your claim has reasonable prospects and you intend to proceed. Don't be defensive or emotional. Keep it on record in case the matter escalates. If it's a formal deposit order application, you must respond within the tribunal deadline.

The letter names specific weaknesses in my case. Should I worry?

Maybe. If the weaknesses are genuine (a point you actually can't prove, a legal test you fail), address them. Amend your claim, focus your case, gather more evidence. But if the criticisms are speculative or misread your case, respond firmly explaining why you disagree. Don't assume the letter is right.

What is the difference between a deposit order and a costs order?

A deposit order (Rule 38/39) is an order made at an early stage requiring the claimant to pay money into court as security for costs — if you lose, that money goes to the other side. A costs order is made at the end if you lose — you pay the other side's actual legal costs (or part of them). Deposit orders are rare; costs orders rarer still.

If the other side made a Calderbank offer and I rejected it, what happens?

If you reject a Calderbank offer and then lose at hearing, you may be ordered to pay the other side's costs from the date of the offer forward — even if you'd normally have won up to that point. This is a serious consequence. But if you do better than the offer (win, or win more), the offer has no effect. Get advice before rejecting a formal offer.

Can the employer be ordered to pay MY costs if I win?

Rarely. Costs are not normally available to the winning party in tribunal cases (unlike courts). The tribunal can order the losing party (the employer) to pay your costs only if they acted unreasonably in the proceedings — for example, by ignoring tribunal orders, making false allegations, or abusing the process. This is uncommon.

If I win, can I claim the legal costs I paid?

Not automatically. Tribunals don't routinely award legal costs to successful claimants (unlike courts). Your compensation covers your losses, but not your legal fees. The only exception: if the employer acted unreasonably in the proceedings (ignoring orders, misconduct), you might claim against them. Otherwise, your own costs are not recoverable.

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