The Ministry of Justice published a consultation paper in October 2026 proposing targeted reforms to the costs regime in Employment Tribunals (ETs). Currently, costs orders in ETs are exceptional — the default is that each side bears its own costs — but the proposals would lower the threshold for awarding costs against a party that pursues a claim or defence that has no reasonable prospect of success.
The consultation proposes three options: (1) retaining the current "no reasonable prospect" threshold but requiring Tribunals to give reasons when declining to award costs after a strike-out; (2) introducing a new "unreasonable conduct" costs power, similar to the Employment Appeal Tribunal's existing power; and (3) a hybrid fixed-costs regime for specified claim types (for example, unpaid wages claims under the Employment Rights Act 1996, Part II). All three options would retain the no-costs default for discrimination claims to avoid deterring genuine claimants.
Background. ACAS data shows a significant increase in ET claims since 2020. The MoJ argues that a minority of claims proceed with little merit, consuming Tribunal resources. Claimant representatives argue that any costs risk would deter low-paid workers from pursuing legitimate claims. The ACAS early conciliation process (mandatory before lodging a claim) is unaffected by the proposals. For the current limitation rules on ET claims, see the limitation periods by claim type article. The consultation closes on 31 January 2027.