The Government has announced that it intends to implement a provision in the Enterprise and Regulatory Reform Act allowing tribunals to impose a financial penalty on employers who breach employment rights.
At present, most tribunal awards are based on the actual loss of earnings suffered by employees, or the level of ‘injury to feelings’ suffered in a discrimination claim. Few awards have a punitive element.
That is likely to change in April 2014 when this new provision is due to come into force.
From that date, tribunals will have discretion to add a penalty to any tribunal award. The amount of the penalty will be up to 50% of the award, but must be at least £100 and will be capped at £5,000.
The financial penalty will not be levied automatically. A penalty may be awarded where there are ‘aggravating features’ to a breach of employment rights, or where the employer has acted unreasonably or maliciously. The tribunal should take into account the employer’s size and resources. A large company with its own HR department is more likely to face a penalty for a breach of employment rights than a small business.
Whilst employment tribunal claims are now probably less attractive to employees following the introduction of tribunal fees, this new provision will be a further incentive to employers to ‘get it right’ when they are contemplating dismissal, or dealing with a grievance, for example. Although the ACAS Code of Practice on Disciplinary and Grievance Procedures is now well established, and sets out clear principles for employers to follow, it is still not uncommon for employers to fail to follow a fair process. This can lead to claims for unfair dismissal, for example. An employee with a good claim may be prepared to pursue it, despite having to pay a fee, if the potential rewards are greater. It’s therefore very important that employers understand and apply the principles of good employment practice, and ensure that employees are dealt with fairly in the workplace, in order to avoid punitive awards.