It has been announced that from April 2014 employment tribunals will have the power to order losing employers to pay a financial penalty on top of any financial award made to the claimant.
The Employment Relations Minister recently announced (via Twitter!) that the power for employment tribunals to order an employer who has lost at a case to pay a financial penalty of up to £5,000 will come into force from April 2014. The minimum amount of any penalty will be set at £100.
The new power is contained in section 16 of the Enterprise and Regulatory Reform Act 2013.
Financial penalties will not be paid to the claimant in the case but to the Secretary of State and the Consolidated Fund.
A penalty may be imposed by an employment tribunal where the employer's breach has "one or more aggravating features". Unhelpfully, the meaning of this phrase is not defined further in the legislation.
A financial penalty may be ordered against an employer even if a financial award has not been made to the claimant. However, if a financial award has been made, the financial penalty must be 50% of the amount of the award.
If the employer pays the penalty within 21 days it will get a 50% discount. Tribunals must take account of the employer's ability to pay when deciding whether to order a penalty.
While the introduction of fees for issuing an employment tribunal claim may be regarded as a "pro-employer" development - as it seems likely to discourage some claims - the introduction of financial penalties for losing employers redresses the balance somewhat. This development is likely to encourage respondents to consider settlement rather than risk fighting a claim where they have a weak defence.
From April 2014 an employer could potentially be on the hook not only for monetary compensation to be paid to a claimant but also re-imbursement of their employment tribunal issue and hearing fees and a financial penalty paid to the Secretary of State. With the costs of getting it wrong set to increase, paying for professional advice early on and training staff properly looks like a good investment!