Since the start of April 2014, Employment Tribunal judges are able to impose financial penalties on employers who have severely breached employment law.
The main aim of financial penalties is to ensure compliance with employment law by penalising rogue employers. However, contrary to some reports financial penalties are not designed to be a routine part of employment tribunals. In fact we anticipate financial penalties will only be imposed in the most serious tribunal cases. The law is clear that financial penalties are only suitable if the breach of employment law has ‘aggravating features’.
What constitutes aggravating features? The legislation does not say specifically what these features are, it’s a matter for tribunal judges to decide. However, an employment tribunal may be more likely to find that the employer’s behaviour in breaching the law had aggravating features where.:
- the action was deliberate or committed with malice,
- the employer was an organisation with a dedicated human resources team,
- or where the employer had repeatedly breached the employment right concerned.
On the other hand, the employment tribunal may be less likely to find that the employer’s behaviour in breaching the law had aggravating features where:
- an employer has been in operation for only a short period of time,
- is a micro business,
- has only a limited human resources function,
- or the breach was a genuine mistake.
The legislation states clearly that a financial penalty will be calculated at half the value of any award to the claimant. Financial penalties have a minimum amount of £100 and a maximum of £5000. Respondents will get a 50% discount if they pay within 21 days. Respondents can appeal the financial penalty itself, or the amount charged.
A third party will administer the collection of financial penalties and collected monies will be paid to the State via the Government’s consolidated fund.
I would of course welcome any comments you may have.
4 comments
Comment by Richard Dunstan posted on
Interesting post, Nick. Do you have any indication of how many times a penalty has been imposed to date? Is use of the power being monitored (with a view to an assessment at some point of its effectiveness/value)?
Comment by Nick Morgan posted on
Thanks for your comment Richard. Financial Penalties (FPs) only commenced in April and as you know, ET cases can take a number of months to reach hearing stage, so there have not been any FPs imposed yet. The impact of FPs will be monitored.
Comment by Martin posted on
A maximum of £5000, that'll be less than the legal costs of any appeal, it's a paltry amount, what kind of deterrent is that supposed to be? I won a tribunal against a former employer and my total legal fees were around £8k, that would put most people off as these are non-recoverable. An additional £5k to the employer, who breached the ACAS code as well, would have been pocket money.
Comment by Nick Morgan posted on
Thanks for your comments Martin. The penalty has just been introduced and it will take time to see its effect but if the amount of the penalty is too low there is scope in the legislation to increase the maximum value or the calculation (http://www.legislation.gov.uk/ukpga/2013/24/section/16).