Financial Penalties for Losing Employers

The Government has recently announced that, with effect from 6^th April 2014, Employment Tribunals will have the power to order that a losing employer pay a financial penalty in specified circumstances.

There are rather restrictive cost provisions in place currently within the system but the new provisions give the power to issue a financial penalty of up to £5,000 payable to the Secretary of State where a particular case has “aggravating features”.

Unsurprisingly, the term “aggravating features” is not explained or defined in the legislation. It is suggested by the Government that penalties will be imposed where there is unreasonable behaviour for example where there has been negligence or malice involved but genuine mistakes by the employer will not be penalised. The size of the employer, duration of the breach of any employment right and the behaviour of the parties will be taken into account when deciding whether to impose a penalty.

Interestingly, a penalty may be ordered even if a financial award has not been made to the Claimant. The minimum amount of the penalty is £100 and the maximum £5,000. There will be a reduction is 50% of the penalty is paid within 21 days and it is unclear as to how the Government proposes to enforce the payment of fines, particularly given that a number of financial awards made to Claimants remain unenforced.

It remains to be seen how strictly the new provisions will be imposed but employers must appreciate that there is at the least the facility to levy a fine on analysis of the circumstances of each individual case.