Government proposals under the ‘Good Work Plan’, which we previously discussed on the ECA blog, would see increased financial penalties for employers found to be in breach of their employees' rights.
Where an employment tribunal finds that an employer has breached the claimant's employment rights, the tribunal can order the employer to pay a financial penalty if it is of the view that the breach has aggravating features. A tribunal will consider the employer’s ability to pay before making an award, which will impact more on larger employers considered to have deeper pockets.
The legislation does not define what “aggravating features” are. However, explanatory notes to the Enterprise and Regulatory Reform Act 2013 suggest that an Employment Tribunal is more likely to find aggravating features where the employer’s action was deliberate or committed with malice, or where it has repeatedly breached the employment right concerned. Larger organisations with a dedicated Human Resources team are more likely to be penalised than smaller ones with little or no HR support. Employers should not normally be penalised for unintended or accidental shortcomings.
Having said that, 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.
The penalty will usually be 50% of the award made to the claimant (e.g. if the award made to the claimant is £1000, the penalty will normally be £500), subject to a minimum of £100 and a maximum of £20,000. The maximum limit on these penalties was increased on the 6th April 2019, from £5,000 to £20,000. Employers will qualify for a 50% reduction if they pay the penalty no later than 21 days after the notice of the decision to impose the penalty is sent to them (following the example above, the penalty will be reduced to £250 from £500 if paid within 21 days).
The money raised from imposing penalties (still following the examples above either a full penalty of £500 or a reduced one of £250) will be payable to the Exchequer, and not the claimant. The penalty will be in addition to any compensation awarded to the claimant (£1000 following the example above).
All employers should ensure that they comply with employment law and act fairly when implementing workplace practices and policies to avoid tribunal claims and the financial penalties that may come with them.
For more information about the implications of these changes and any other employment law issue, please do not hesitate to contact the Employee Relations Department.
Tel: 0207 313 4804