Employment Tribunal litigation

Whether you are an employer or an employee, the advice is the same: try to resolve the dispute without going to the Employment Tribunal. Below, we explain why this is often advisable and how it can help you navigate the Employment Tribunal process.

Why avoiding the Employment Tribunal can be a wise move

• Legal costs: You will rarely recover your legal fees, even if you win. There are limited exceptions, so you should budget on the basis that your costs will not be recovered. Legal fees can reach £30,000 or more in a contested case.
• Uncertainty: Litigation outcomes are never guaranteed. Evidence may emerge late in the process and significantly change the position. A settlement can avoid the uncertainty of a final hearing.
• Time limits: Most Employment Tribunal claims have a time limit of three months less one day, subject to the type of claim and applicable rules. You need to act quickly.
• Mediation: Mediation can provide a successful and more cost-effective alternative to a hearing.

How to achieve the best chance of success

Experience shows that preparation is important, even if your ultimate aim is to settle. Being ready to present your case can strengthen your negotiating position. This may mean incurring some costs at an early stage, but preparation can help employers manage settlement costs and employees support their claim for a fair settlement.

In some cases, issuing an Employment Tribunal claim may help bring the parties to the negotiating table. However, many claims settle before a final hearing.

What does good preparation for the Employment Tribunal mean

Every case is different, and the right strategy will depend on its facts and evidence. Some important points to consider include:

• Gathering and organising evidence: Identify the relevant documents and witnesses who can support your position.
• Assessing weaknesses: Review potentially damaging evidence honestly and plan how to address it.
• Considering settlement: A genuine attempt to resolve the dispute can be important. ACAS provides an early conciliation service designed to help parties reach settlement before a claim is issued.

Employees may also face difficulties obtaining witness evidence where colleagues are reluctant to risk their own employment by supporting a claim.

Making a claim to the Employment Tribunal

For employers: Employment practices should be kept under review to help minimise the risk of claims. Depending on the circumstances, offering a settlement agreement may be a less costly and less risky way to resolve a dispute than defending a Tribunal claim.

For employees: If litigation is necessary, our employment law specialists can help you assess your options and prepare your case. A claim must be presented clearly and within the applicable time limit. Failure to comply with procedural requirements can put your claim at risk. There is no fee payable to the Employment Tribunal to submit a claim, although you may incur legal costs.

Orders available in the Employment Tribunal

If the Tribunal finds that an employee was unfairly dismissed, it may consider:

• Reinstatement or re-engagement: Reinstatement means returning to the same job, while re-engagement means returning to a different role with the employer or an associated employer. These remedies are relatively uncommon.
• Compensation: An award may compensate the employee for financial loss, subject to the relevant statutory rules and limits. Compensation for discrimination is not subject to the same statutory cap as ordinary unfair dismissal compensation.

Employment Tribunals may be reluctant to assess losses arising from share rights or share options, depending on the nature of the claim and the evidence. In some cases, these losses may form part of the wider financial loss arising from termination.

Option plans may contain provisions limiting liability for the loss of option rights. Their effect depends on the wording and applicable law. Contractual terms cannot exclude statutory employment rights where the law prohibits this, so it is important to review the relevant provisions carefully.

Calculation of compensation payable for unfair dismissal

There are statutory limits on compensation for ordinary unfair dismissal. For highly paid executives, these limits may be significantly lower than their actual loss of earnings. Depending on the circumstances, other claims or court proceedings may need to be considered.

Basic award

The basic award is calculated using a statutory formula based on the employee’s age, length of service and weekly pay, subject to statutory limits. From 6 April 2026, the maximum week’s pay used in the calculation is £751, giving a maximum basic award of £22,530. These limits may change annually

Compensatory award

The compensatory award reflects financial loss caused by the unfair dismissal. This may include loss of earnings, benefits, bonuses and pension rights, subject to the applicable legal rules.

For dismissals taking effect from 6 April 2026, the maximum compensatory award is generally the lower of £123,543 or 52 weeks’ pay. Certain types of automatically unfair dismissal are not subject to this cap. The statutory limits are due to change from 1 January 2027, so the applicable rules should be checked for the relevant dismissal date.

Reductions to compensation for unfair dismissal

Compensation may be reduced in certain circumstances, including where the employee contributed to their dismissal or failed to take reasonable steps to mitigate their losses.

Where an employer’s failure to follow a fair procedure has affected the dismissal, the Tribunal may also reduce compensation to reflect the possibility that the employee would have been dismissed fairly in any event. This does not itself mean that the original dismissal was fair.

Discrimination claims in the Employment Tribunal

The statutory limits that apply to ordinary unfair dismissal compensation do not apply in the same way to discrimination claims. Compensation for discrimination is uncapped and may include financial loss and injury to feelings, depending on the claim and circumstances.