Have you done any research into ET and what happens there? There is nothing scarier than the unknown and if you know what to expect, it will help hugely.
I represented my husband in an ET case... gosh, 8 years ago!

, and I was pooing myself, if truth be told.

Anyway, what I did is check the local ET hearings, and went and sat in the public in one or two of them to familiarise myself, see how the panel dealt with both sides, etc. It reassured me no end, I have to tell you, and I can not recommend it highly enough.
Secondly, if you haven't yet, I suggest you familiarise yourself with the terms and the procedure here:
Employment Tribunal - The hearing
Next, what makes you think you would have to pay compensation if you lost? Even if a party wins their case they will only have their legal costs paid by their opponent in exceptional circumstances, for example where the other party brought or defended a case with no chance of them winning.
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I really don't want to let the 'bully' win but it just seems like everything is stacked against the 'little people'!
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No offence, but aren't you being over-dramatic? It's a hair salon, not the Microsoft Empire. And how is it being "stacked"? You will both have a chance to state your case in front of a panel, which will then decide whether your case is a valid one or not.
Read here for a simple explanation of what happens and how:
Employment Tribunals : Directgov - Employment
At the moment, you seem to be so scared that you have lost perspective of the fact that YOU stood your ground, YOU are fighting back and YOU shouldn't let the prospect frighten you.
So read, read, read some more. Stop behaving like a victim and start preparing to
win so you and your wife can get on with your lives knowing you took on the bully and beat him down. If he's prepared to text and make false statements, that means he is even more scared or he wouldn't need to do this.
I can't guarantee what will happen in the tribunal, but what I know is that ETs often lean towards the employee anyway, especially when the employer brings in the big guns, solicitors and stuff.
And I'll tell you something else, when you win, the feeling is
incredible. When I won my husband's case, I was so happy to see his ex-employer's face (and their solicitor! OMG!!!

) that I didn't even hear how much the ET was awarding us, and I had to wait until we got the court order!
So enough with the negative, get hold of that backbone that made you start down that path in the first place, and start acting to WIN.
Keep us updated.
