Increase in Employment Tribunal Penalties - Important Notice

If you appear before an Employment Tribunal because of a claim against you by an employee, the results could be considerably more serious after 6th April.

That’s because new regulations are being introduced that increase the maximum penalty for an aggravated breach of employment law from £5,000 to £20,000.

The Employment Rights (Miscellaneous Amendments) Regulations 2019 amend the Section 12A of the Employment Tribunals Act 1996 so that it now reads:

“12A Financial penalties

(1) Where an employment tribunal determining a claim involving an employer and a worker—

(a) concludes that the employer has breached any of the worker's rights to which the claim relates, and

(b) is of the opinion that the breach has one or more aggravating features,

the tribunal may order the employer to pay a penalty to the Secretary of State (whether or not it also makes a financial award against the employer on the claim).

(3) The amount of a penalty under this section shall be—

(a) at least £100;

(b) no more than £20,000.”

What are aggravating features?

The Act doesn’t define “aggravating features” but when the tribunal is considering the case, they will look at a number of factors to determine whether an award will be made.

The employer’s circumstances, such as:

• its size;

• the way it behaved;

• how long the breach went on, and

• the HR resources available to the employer

• will be considered.

In addition, the tribunal will look at whether the employer’s actions were:

• deliberate; or

• malicious; and

• whether there were repeated breaches of the employee’s rights.

In a case where a financial award has been made, the penalty will be equal to 50% of the financial reward (subject to the above cap).

If the penalty is paid within 21 days of the written notice of the tribunal’s decision, it will be reduced by 50%.

rradar Employment Solicitor Toni Haynes commented:

“The current level of the penalty was felt to be insufficient as £5,000 isn’t a sufficiently high enough deterrent to employers. In addition, it doesn’t always reflect the higher value claims, which are more likely to have aggravating features, and it is lower than the current penalty for non-payment of the National Minimum Wage, so the significant increase is intended to rectify this.

“Employers who deliberately flout employees rights are likely to find themselves in a position where they have to pay a significant penalty in addition to any compensation awarded. For those employers who have insurance policies in place to cover the risk of claims, the policy is unlikely to cover the penalty. There is also a risk that any policy might not provide cover if a Tribunal finds that there has been a deliberate breach of employment rights.

“To avoid the risk of a claim and a penalty, employers are encouraged to seek early advice on any employment issues.”

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