A calderbank offer is an offer from one party to another in a dispute, via correspondence marked “without prejudice save as to costs”. This is generally intended to put the other party on notice that this is a serious attempt at settlement and that an unreasonable refusal could have financial consequences.

The term comes from the divorce case of Calderbank v Calderbank which established the principle that, where one party has made an offer to settle on terms which are rejected and, a court subsequently makes an order which is less favourable than that offer, the court may take this fact into account when deciding whether to make an order for costs. The idea being that a party who unreasonably refuses to settle should be held accountable for the other party’s costs which arise as a result of being forced to continue with litigation.

Although calderbank offers are recognised in the employment tribunal, the way in which they apply is different to the way they apply in the civil courts. This is because, unlike in the civil courts (where the loser pays), the general rule in the employment tribunal is that each party bears their own costs. Employment tribunals have a discretion to make an award of costs in certain limited circumstances, broadly, where there has been unreasonable behaviour by the other party or their representative. However, an award of costs is not guaranteed for the winning party.

A calderbank offer is just one factor which the employment tribunal can take into account in exercising its discretion whether to award costs. However, the mere existence of a calderbank offer should not, by itself lead to an order for costs. A tribunal must consider whether the conduct of a party in rejecting the offer was unreasonable.

It has been held that a claimant is entitled to pursue their case in order to obtain a finding of unfair dismissal, even if the employer has offered the maximum compensatory award, if it is not prepared to admit the dismissal was unfair (see Telephone Information Services v Wilkinson).

An employment tribunal will only become aware of a calderbank offer once it has made its substantive decision and if it is then required to consider costs.