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Employers now face paying a fine if they lose at the Employment Tribunal

For claims brought after 6th April 2014, Employment Tribunals have new powers to impose a financial penalty on employers who unsuccessfully defend a claim. The fine is 50% of the financial award from the tribunal, subject to a minimum sum of £100 and a maximum cap of £5,000. The penalty will be reduced by 50% if it is paid by the employer within 21 days. Payments are made directly to the Secretary of State. Whether or not a tribunal decided to use its powers to order a fine in a case which is being heard is entirely in its discretion.

How will the tribunal exercise its discretion?

The tribunal will need to take into account whether an employer’s breach of the employment rights in question has “one or more aggravating features”, whether or not a financial award (such as for unfair dismissal ) has been made to the employee. There is no definition in the legislation as to what amounts to “aggravated features”, but government guidelines suggest the following may be taken into account:-

  • the employer’s size and resources;
  • the duration of the breach of the employment right;
  • the behaviour of both the employer and employee.

Accordingly, larger employers with full HR services may find it more difficult to justify a breach of an employee’s employment rights (and more likely to therefore be subject to a fine) than, say, a new micro firm that has recently been established and which has little or no HR function. The risk of having to pay a fine is something employers will now have to consider in relation to new claims being brought after 6th April 2014 when the rules were introduced. For further advice on this or any other issue, please contact Philip Landau, call 020 7100 5256 or email pl@landaulaw.co.uk

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