Financial Penalties in the Employment Tribunals

On 6th April 2014 Section 16 of the Enterprise and Regulatory Reform Act 2013 (“the Act”) was brought into force. This amends the Employment Rights Act 1996 and gives Employment Tribunals the power to order employers to pay a penalty if the employer has breached any of the worker’s rights to which the claim relates and has one or more aggravating features.

The amount of the penalty is 50% of the amount awarded to the employee subject to a minimum of £100 and a maximum of £5,000.

The Tribunal must have regard to an employer’s ability to pay in deciding whether to order the employer to pay a penalty.

There is nothing in the Act which says what would amount to an aggravating feature, but the guidance notes published by the government suggest that relevant factors might include:

• the size of the employer;
• the duration of the breach of the employment right and the  behaviour of the employer and of the employee;
• whether the action was deliberate or committed with malice rather than a genuine mistake; whether the employer had a dedicated human resources team; or
• where the employer had repeatedly breached the employment right concerned.

In the situation where a Tribunal finds against the employer, but makes no award (e.g. where they allow the parties to agree compensation between themselves following a judgment that the Employer is liable) the Tribunal can still use its discretion to set the amount of the penalty (subject to the £100 minimum and £5,000 maximum).

This represents just the latest in a series of changes which mean an employer who loses at an Employment Tribunal hearing could end up paying out far more than an employee who loses.  For example, it was already the case that if an employer has not complied with section 1 of the Employment Rights Act (provision of written particulars of employment), the Tribunal can award up to 4 weeks gross pay to the employee.  In addition if the employee was dismissed in breach of the Acas Code of Practice, the Tribunal can order a 25% uplift on any award made.  Finally the Tribunal can also order the employer to pay the fee incurred by the employee in bringing the claim, which could be as much as £1,200.

So employers do need to be aware that there are additional amounts that they could have to pay out over and above the award for loss of earnings and the basic award.  For that reason it is important to make sure any dismissal is done properly and fairly in accordance with the law and the Acas Code of Practice. This means that even if a claim is brought the employer can defend it confidently.

Please contact Marsha Robinson here for further information.