Financial penalties for employers who lose at the Employment Tribunal

31st October 2013 One of the proposals that the Government made over reform of the Employment Tribunals was the proposed introduction of penalties on employers that lose cases in the Tribunal in addition to any order of compensation to the claimant. This was referred to by the Government as part of a balance in light of their proposals to introduce fees for starting claims on the Tribunal. However, the introduction of fees went ahead in July, while the Government announced that it had no immediate plans to introduce the financial penalties on losing employers.

Recently Jo Swinson, the Employment Minister, has announced that the powers for Employment Tribunals to impose financial penalties on losing employers will be brought into effect in April 2014.

It must be remembered that the penalties being referred to are in addition to any order of compensation for the claimant. However, they will not be automatic, but will be at the absolute discretion of the Tribunal. These financial penalties will only be imposed in the event that the Tribunal finds that there has been an "aggravating feature". The problem is that there is no set definition given for "aggravating feature".The Government had indicated that the penalty could be imposed when there has been some form of unreasonable behaviour, such as malice or negligence. There is an explanatory note to the legislation which provides a non-exhaustive list of factors that the Tribunal can take into account in considering if there has been an aggravating feature, such as repeated breaches of the contract of employment   

If imposed the penalty will be set at 50% of the amount of the compensation that has been ordered to be paid to the claimant, subject to an upper cap of £5,000- with a reduction if payment is made within 21 days. The penalty will be paid to the Secretary of State.

Clearly we will have to wait and see how the Employment Tribunals deal with this power, and how they interpret the phrase "aggravating feature". It is also unclear as to how high the threshold will be for any behaviour to amount to an aggravating feature.

The clear message to employers in light of this development is to ensure that they carry out their disciplinary and grievance procedures fairly and deal with their employees as fairly and reasonably as possible. Consistency of approach should be recommended, and any concerns raised by employees should be treated seriously and promptly.

If you need any advice or assistance on the issues raised in this article please do not hesitate to contact us at Hallett Employment Law Services Ltd.