Auto-enrolment Penalty Confirmed

On 8 May 2017 a regulatory intervention report was issued by the Pensions Regulator under section 89 of the Pensions Act 2004 in respect of action taken against a shoe retailer, Johnson Shoes Company. The regulator has published details of the penalty of over £40,000 which was imposed on the retailer for breaches of the employer auto-enrolment duties.

Johnsons Shoes Company’s staging date was 1 May 2014 and the Company failed to provide the Regulator with a declaration of compliance by the deadline. First of all, the Regulator issued a compliance notice and, when the retailer still didn’t comply, it was issued with fixed and escalating penalty notices. Johnsons did eventually provide the declaration of compliance and paid the £400 fixed penalty in December 2015, however it refused to pay the escalating penalty. The penalty increased by £2,500 per day and reached £40,000 by the time it stopped accruing.

The Regulator thereafter issued County Court proceedings for the unpaid penalty. The Regulator’s authority in terms of issuing the penalty notice was challenged by Johnsons; however, the Regulator applied to the Court for the defence to be struck out on the basis that it had no reasonable grounds of success. Another argument of the Regulator was that Johnson’s defence represented an abuse of process because the company should have challenged the escalating penalty notice by applying to the Regulator for a review in the first instance and thereafter the First-tier Tribunal.

Before the Regulator’s application to strike out the defence was heard, Johnsons agreed to pay the outstanding penalty and meet the Regulator’s Court fee (which was £2,000).

The Regulator has confirmed that this case is a remainder to employers of the consequences of failing to cooperate fully with its enquiries and investigations. This case clearly demonstrates that the Regulator will use all its powers to ensure compliance with the statutory auto-enrolment duties imposed on employers and it is therefore of utmost importance that employers comply with their obligations.