Deposit Orders in Employment Tribunal Cases

In Employment Tribunal proceedings, a deposit order is a procedural tool that a tribunal may use to manage cases where part of a claim, defence (response) or reply appears particularly weak. A deposit order requires the party advancing the weak allegation or argument to pay a sum of money up front before they can continue to pursue that aspect of the case. If the depositor fails to pay, the specific allegation or argument will be struck out. Deposit orders are designed to encourage focused litigation and discourage pursuit of issues that have “little reasonable prospect of success”. Understanding when and how deposit orders are used helps parties navigate tribunal procedure and protect their rights.

Legal Basis of Deposit Orders

Deposit orders are now governed by Rule 40 of the Employment Tribunal Procedure Rules 2024. Under these rules:

• A deposit order may be made at a preliminary hearing where the tribunal considers a particular allegation or argument in a claim, response or reply has little reasonable prospect of success.
• The tribunal may require the party advancing that allegation (“the depositor”) to pay a deposit not exceeding £1,000 as a condition of continuing to pursue it.
• The tribunal must make reasonable enquiries into the depositor's ability to pay and consider that information when setting the amount.
• The tribunal must provide reasons for making the deposit order and explain the potential consequences.
• If the deposit is not paid by the specified date, the relevant allegation or argument is struck out.

The 2024 rules came into force from 6 January 2025 and replace earlier procedural provisions.

Purpose and Rationale

A deposit order is not meant to penalise parties unfairly but to act as a case management tool. It signals that a judge considers a particular part of the case is unlikely to succeed and encourages parties to concentrate on the strongest elements of their claims or defences. Deposit orders can also deter litigation of issues that have little merit, reducing wasted time and costs for both parties and the tribunal.

When a Deposit Order May Be Made

Deposit orders are typically considered at a preliminary hearing, such as a case management or preliminary issues hearing, where the tribunal assesses the early stages of a claim. The tribunal may make a deposit order when:

• A specific allegation or argument has been identified as having little reasonable prospect of success.
• The tribunal judge has exercised discretion after reviewing the parties' Written Submissions and evidence.
• A party (claimant or respondent) has applied for a deposit order against the other.

Keep in mind that deposit orders should not be used merely to clarify a case or because a claim is unclear; the tribunal must specifically conclude that the allegation or argument has little realistic chance of success. In Tree v South East Coastal Services Ambulance NHS Trust, the Employment Appeal Tribunal (EAT) held that deposit orders should not be used simply to address unclear pleadings.

Amount of Deposit and Ability to Pay

A deposit order can require payment of up to £1,000 for each allegation or argument identified. The tribunal has flexibility in setting the exact amount and will typically make reasonable enquiries into the depositor's financial circumstances before deciding how much to require them to pay. This ensures that deposit orders do not unduly limit access to justice for parties unable to afford a high deposit.

There is no statutory minimum, and judges sometimes order nominal deposits (such as £1) where a large sum would be disproportionate, particularly for litigants with limited means. In the EAT decision H v Ishmail and another, deposit orders were reduced, in part, because higher amounts would have impeded access to justice.

Consequences of Paying or Failing to Pay

If the Deposit Is Paid and the Claim or Argument Succeeds

• If the specific allegation or argument is successful, the tribunal will refund the deposit.
• The refund occurs regardless of whether the party wins the overall claim; only the subject matter of the deposit order is relevant.

If the Deposit Is Paid but the Allegation Fails

• If the tribunal ultimately decides against the depositor for substantially the same reasons given when making the deposit order, the depositor will be treated as having acted unreasonably in pursuing that part of the claim.
• The deposit will usually be paid to the other party (multiple parties if ordered by the tribunal) and can count towards any costs or preparation time order awarded against the depositor.

If the Deposit Is Not Paid

• Failing to pay the deposit by the deadline set in the order means that the tribunal must strike out the specific allegation or argument to which the order relates.
• If the deposit relates to an entire response, this may lead to the tribunal treating the matter as uncontested on that point.
• If part of a claim is struck out in this way, that part will not be heard at a final hearing.

Practical Considerations for Parties

Responding to a Deposit Order Application

If you are faced with a deposit order application against your claim or defence:

• Prepare strong submissions explaining why your allegation or argument has more than “little reasonable prospects” of success.
• Provide evidence and legal authority showing that the tribunal's initial assessment is premature or incorrect.
• Be ready to discuss your ability to pay and, if necessary, propose a nominal deposit based on financial circumstances.

Challenging or Varying a Deposit Order

Under general case management powers (such as Rule 29 of the 2024 Procedure Rules), a party affected by a deposit order may apply to vary, suspend or set aside the order if they can show it is in the interests of justice to do so - for example, if they were not given a reasonable opportunity to respond.

Strategic Use by Respondents

Respondents (employers) may apply for deposit orders as an alternative to more drastic steps like strike out, particularly where they believe certain allegations are weak but do not meet the strict test for immediate dismissal. Applying for a deposit order can focus the case on viable issues and encourage claimants to reconsider or withdraw arguments with little chance of success.

Common Questions

Does a Deposit Order Replace a Strike Out Order?

No. Deposit orders and strike out are distinct tools. A deposit order requires payment before continuing with an allegation, whereas a strike‑out order removes the allegation or defence entirely for having no reasonable prospect of success. Deposit orders are often used when the tribunal considers the issue weak but not clearly unsustainable.

Is a Deposit Order Automatic?

No. A tribunal must exercise its discretion and provide clear reasons for making a deposit order. The tribunal must also enquire into the depositor's financial means before setting the amount.

Can Newly Introduced Deposit Rules Affect Ongoing Cases?

Yes. The updated rules introduced in 2025 apply to cases where the new procedural framework is in force. Parties should check whether their case falls under the Employment Tribunal Procedure Rules 2024 when deposit orders are being considered.

Summary

A deposit order is a case management mechanism in Employment Tribunals that allows a judge to require a party to pay a sum - up to £1,000 - as a condition of continuing to pursue a specific allegation or argument that appears to have little reasonable prospect of success. The tribunal must consider the depositor's ability to pay and provide reasons for the order. If a deposit is not paid, the relevant argument is struck out. Paying the deposit and ultimately losing on that point can lead to costs and may see the deposit paid to the opposing party. Deposit orders should be used carefully, with attention to procedural fairness and proportionality, and can be challenged where interests of justice support variation or setting aside.

James William Steven Parker

James is the founder of UKLegalGuides.com and a former agent at the Ministry of Justice (UK). With a background in processing legal claims, he launched this platform to make the laws of England and Wales accessible to everyone.