Financial penalties for employers – is your business at risk?

Financial penalties of up to £5,000 can be awarded against employers who lose cases after 6 April 2014.

How much can be awarded?

Penalties are subject to a minimum award of £100, and a maximum of £5,000.

The precise amount of the penalty will, in most cases, be assessed by reference to the award made to the successful Claimant. The penalty will be set at half of the total award unless this figure is less than £200, or more than £5,000, in which case the statutory maximum or minimum amounts will be awarded. The idea is that the penalty should be proportionate to the award.

Multiple claims in respect of the same act and the same Claimant are treated as a single claim, so the most that can be awarded is £5,000.

If a non-financial award has been made, the Tribunal can still impose a penalty and determine the amount payable.

Payments made within 21 days of the order will be discounted by 50%.

Who is the money paid to?

The money raised from imposing penalties will be payable to the Exchequer and will not be a bounty paid to the successful Claimant.

When will a penalty be ordered?

Penalties will not be automatically ordered against you if you lose. Instead the Tribunal will have discretion to impose a penalty if there are any “aggravating features”. Even if these exist, it will consider your ability to pay before making an award which will impact more on larger employers considered to have deeper pockets.

It appears to be open for successful Claimants to ask the Tribunal to make an award, but a Tribunal can also do so without a request being made.

The Government has suggested that the Employment Tribunal is likely to find aggravating features where the action was deliberate or committed with malice, or where the employer has repeatedly breached the employment right concerned. It also suggests that larger organisations are more likely to be penalised than smaller ones as employers with a dedicated Human Resources team will be expected to get things right – presumably on the basis they should know better.

You should not be penalised for unintended or accidental shortcomings and it appears that small businesses with little or no HR support will be given more latitude.

However, very little guidance is available and it is regrettable that businesses will only be able to fully assess the risk being ordered to pay a penalty once cases are reported.

Is there an appeal process?

Yes. Respondents can apply for the Tribunal to review any financial penalty awarded against them unless the Tribunal subsequently awards compensation to the Claimant for a failure to comply with a Tribunal recommendation, reinstatement or re-engagement order.

- Glenn Hayes

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