Financial Penalties for Employers

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Also expected to come into force (but not now until 2014) is the proposal that tribunals will have the power to impose a financial penalty on employers who lose at tribunal a penalty of up to 50% of any financial award, with a minimum threshold of £100 and a maximum cap of £5,000. These monies would be payable to the Government.  Where a non-financial award is made, the tribunal will be able to ascribe a monetary value.  The penalty will be reduced by 50% if paid within 21 days.  Awarding a financial penalty will be at the tribunal’s discretion; it will not be automatic. The tribunal’s discretion will be guided by whether or not it can find any ‘aggravating features’ in the case. The Government has suggested that tribunals would impose penalties where “the breach involves unreasonable behaviour, for example where there has been negligence or malice involved”.

Practical Implications

On the one hand, the Government wishes to reduce burdens on business (including reducing costs of tribunal claims). On the other hand, given litigation risks and the threat of heavy fines, employers may feel that they are being put under undue pressure to settle unmeritorious claims.

Otherwise, it remains unclear to what extent the tribunals will rely on these provisions. Expect uncertainty for some time, at least until we begin to see the provisions being exercised by the tribunals.

For further information, help or advice please contact our Employment Team on 0191 211 7777 or email [email protected].