With effect from 6 April 2014, employers that lose an Employment Tribunal will be faced with the prospect of having to make a financial penalty to the Secretary of State. The amount will depend on the findings of the Tribunal and whether the case has highlighted that the employer has breached the claimant’s employment rights – the consequence of which could be a fine of up to £5,000.
This is a further attempt by the Government to reduce the high number of tribunal claims and goes hand in hand with the new legislation regarding Early Conciliation.
With the loss of a Tribunal claim, employers will need to dig deep to not only cover the actual costs of fighting the claim (whether this is internal or external resources including legal representation), any award made by the Tribunal, any reimbursement of fees paid (as ordered by the Tribunal) to the claimant in order for them to pursue the claim and now a financial penalty for poor working practices.
In deciding whether to impose a financial penalty, Tribunals will consider what the new legislation refers to as ‘aggravating features’ and whether one or more of these have been involved in the claim.
The CIPD has reported that the deciding factors relating to a fine being imposed on an employer are likely to include the size of the employer, the length of time of the breach of the employment right and the behaviour of the employer and the employee.
Aggravating features that are likely to be found where the employer’s behaviour is in breach of the employee’s rights are: 1) whether the employer’s action was deliberate or malicious; 2) whether it was a recurring breach of employment rights; and whether the organisation has a dedicated HR team.
Tribunals are likely to go easier on smaller organisations with limited or no HR function and businesses that have only been trading for a short period of time.
Makbool Javaid, Partner and Head of Employment Law at Simons Muirhead and Burton Solicitors has clarified the financial implications for employers as follows:
- If the Employment Tribunal purely makes a non-financial award – for example an order for reinstatement – any financial penalty must be at least £100 but cannot exceed £5,000.
- If compensation is awarded, any financial penalty imposed must be set at 50 per cent of the amount of the claimant’s financial award, subject to the £100 minimum and £5,000 maximum.
- If the employer pays no later than 21 days after the date the written notice of the decision is sent to the employer, the amount of the penalty is reduced by 50 per cent.
Tribunals are required to take into account an organisation’s ability to pay a penalty when considering whether to impose a fine.
