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Tribunal Penalty for Employers

11 October 2013 #Employment


The Enterprise and Regulatory Reform Act 2013 received Royal Assent on 25 April 2013 and even though certain sections, such as changes to whistle blowing, came into effect on 25 June 2013 until now there has been no indication of when Section 16 would come into force.  Section 16 grants an employment tribunal the power to impose financial penalties on employers.

However the Minister of Employment Relations, Jo Swinson has recently announced that BIS plan to implement section 16 in April 2014.

When can a tribunal impose a penalty?

The legislation covers employees and workers who bring tribunal claims. If a tribunal finds that the employer has breached any of the claimant’s rights to which the claim relates, and is of the opinion that the breach has one or more aggravating factors, then they can impose a penalty.

Although the claimant must succeed in at least one of their claims for the penalty to be awarded, it is not necessary for the Tribunal to make a financial award against the employer.

As to what is an “aggravating factor”, this seems to be deliberately ambiguous. The penalty is at the discretion of the Tribunal and they would appear to have a wide scope to impose the penalty.

The legislation is clear that the breach must have one or more aggravating features but oddly the payment of the penalty does not go to the claimant who has suffered the aggravating breach, but to the Secretary of State.

This could indicate that the breach would be such that there is no real defence to the claim and the Respondent has therefore wasted the tribunal’s resources in letting the case reach a full hearing, instead of settling the matter with the claimant.

As the breach must have an aggravating factor it does not appear that behaviour during proceedings could be seen as grounds to impose the penalty, but this might be an area of dispute.  

How large a penalty can the tribunal impose?

Concerning the amount of the penalty the tribunal has much less discretion.

If a financial award has been awarded, the financial penalty must be 50% of the amount of the award. However, the tribunal cannot go outside minimum and maximum amounts of £100 to £5,000.

The size of the penalty for multiple claims is also restricted, as the tribunal can award no more than 50% of the total award and no Claimant can receive more than £5,000. The minimum penalty in total remains £100.

If a Claimant wins on more than one claim, only a single penalty can be imposed.

With parallels to an award of costs, the tribunal should also have regard to the employer’s ability to pay.

As if these restrictions did not already reduce the risk to employers from this legislation, if an employer pays the penalty within 21 days of the notice of the decision being sent to them then the penalty is reduced by 50%.

Kenny Fyfe
Carillion Advice Services

Clarkslegal, specialist Employment lawyers in London, Reading and throughout the Thames Valley.
For further information about this or any other Employment matter please contact Clarkslegal's employment team by email at employmentunit@clarkslegal.com by telephone 020 7539 8000 (London office), 0118 958 5321 (Reading office) or by completing the form on this page.

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