Penalties for failure to pay employment tribunal awards
Author: Michael Briggs
Applies to: England, Wales and Scotland
Since the new penalty regime came into force in 2016, employers have paid more than £83,000 for failing to settle tribunal awards.
Since 6 April 2016, employment tribunals have had the power to penalise employers who fail to pay tribunal awards or settlement sums under agreements made with the assistance of ACAS (COT3s).
A warning notice will be sent to an employer requiring them to pay the 'relevant sum' by a date no later than 28 days from the date of the notice. If the employer fails to make the payment on time, a penalty notice may be issued requiring the employer to pay a penalty of 50% of the unpaid relevant sum, subject to a minimum of £100 and a maximum of £5,000.
Money from the financial penalty goes to the government, not to the claimant who failed to receive their tribunal award or settlement sum.
If an employer pays both the relevant sum and the penalty within 14 days of the penalty notice, the penalty fee is reduced by 50%.
The penalty regime for unpaid awards should not be confused with the penalty regime for losing employers which has been in place since 2014. For further details, see our recent article.
Commercial Secretary to the Treasury Baroness Neville-Rolfe has confirmed that since the introduction of the penalty regime, the Department for Business, Energy and Industrial Strategy ('BEIS') has issued 60 penalty notices as a result of 164 warning notices to employers for a failure to comply, resulting with over £83,000 being paid already.
A spokesperson for the BEIS has commented that 'failing to pay employment tribunal awards is unacceptable and the government is committed to tackling the issue.'
Note to employers
The aim of penalties is to deter non-payment of awards, but from the figures it appears that some employers are taking a laidback approach to ensuring tribunal awards are settled on time.
It is clear that employment judges are exercising this new power without hesitancy and it seems likely that this approach will continue in the future as the government continues to encourage compliance.
This document is for informational purposes only and does not constitute legal advice. It is recommended that specific professional advice is sought before acting on any of the information given.