Lost an Employment Tribunal? You could be fined AND have to pay the Claimant

Employment Tribunals will soon be able to order employers who lose claims to pay a financial penalty. This will be applicable to claims filed on or after 6 April 2014 and such penalties will be in addition to any financial awards to a Clamant.

A penalty will be payable by those employers who fail to defend a claim and where the Tribunal finds that their breach of a Claimant’s employment rights had one or more “aggravating features”. From a financial perspective, the penalty which can be levied is a sum which is equal to 50% of the compensation awarded in favour of the Claimant and will be subject to a minimum of £100 and a maximum of £5,000.

You may query what constitutes an aggravating feature. If so, rather unhelpfully, there has been no definition provided by legislation. It will therefore be left to the Tribunal’s discretion and as cases come through the system they will be watched carefully to see what would be categorised as an “aggravating factor”. That said, some explanatory notes provided in relation to the new system confirm that factors which may be taken into account by a Tribunal when deciding whether it should impose a penalty include:

• the size of the employer, the duration of the breach, and the behaviour of the employer and employee;

• if the employer’s actions were deliberate or committed with malice; and

• if the employer was an organisation with a dedicated human resources team, or where the employer had repeatedly breached the particular employment right.

So it looks like a Tribunal is more likely to find “aggravating” features where an employer has a dedicated HR department and a breach has been deliberate or repeated.

Interestingly, penalties will be payable to the Government rather than to the Claimant that suffered the alleged aggravating feature. Also, like parking tickets, there is a reduction in the penalty available if paid within 21 days.

What this means for employers is that it is even more important to deal with grievances appropriately and to obtain legal advice on Employment Tribunal claims at an early stage. The introduction of financial penalties has been criticised for placing additional burdens on businesses and placing pressure on employers to settle claims.  However, employers should remember that a financial penalty will not be made in all cases and a financial penalty will only be awarded if the employer loses a claim at Tribunal and there are aggravating features present.

These notes have been prepared for the purpose of an article only. They should not be regarded as a substitute for taking legal advice.