Tribunal Awards Have More Teeth But Are Still Facing Issues Getting Settlements Actioned

Saturday 07 January, 2017 Written by Elspeth Beatty - Brabners LLP

DBEIS has issued 60 penalty notices to employers for failing to comply with tribunal orders.

A new financial penalty scheme came into force on 6 April 2016, the aim of which is to deter non-payment of tribunal awards and Acas conciliated settlements, and to penalise employers who fail to pay awards and settlements.

The scheme is in addition to the tribunal’s existing power to order an employer to pay a financial penalty to the Secretary of State where the employer is found to have breached a worker’s rights, and that breach has ‘one or more aggravating features’. The tribunal has the power to make such an order, even where an award is not made.

On 13 April 2016 the Department for Business Innovation & Skills published a new employment tribunal penalty enforcement form to accompany the new scheme.

Key points of the process are:

Regarding tribunal awards, a complaint cannot be made until 42 days after the judgment was made. For Acas conciliated settlements, a complaint can be submitted if payment has not been received by the date agreed as part of the settlement;
The employer will first be contacted regarding the outstanding payment, and then issued with a warning notice by an enforcement officer, stating that a financial penalty will be imposed unless the ‘relevant sum’ is paid by no less than 28 days from the date of the notice. The warning notice will explain that the employer has a right to make representations about the unpaid relevant sum or its ability to pay, by the specified date;
If the enforcement officer is satisfied that the employer has failed to pay the unpaid relevant sum in full before the date specified in the warning notice, he may issue a penalty notice requiring the employer to pay a financial penalty to the Secretary of State;
The penalty will be 50% of the unpaid relevant sum, subject to a minimum of £100 and a maximum of £5,000. If the employer pays both the unpaid relevant sum owed to the claimant and the penalty, the amount of the penalty will be reduced by 50%. Interest continues to accrue on a financial penalty which is not paid within the specified period;
There are limited grounds on which an employer can appeal again the imposition of the penalty notice or the amount of penalty, and will have 28 days from the date of the penalty notice to appeal.

A 2013 study conducted by BIS before the changes to the employment tribunal process in July 2013, identified that over a third of awards went unpaid. The study identified that financial difficulties were the main reason for late payment, with 25 per cent of awards remaining unpaid because of insolvency. Over half of claimants surveyed believed that the insolvent company was trading again. In its study, BIS suggests that the phenomenon of so called ‘phoenix companies’ has the potential to damage the reputation of the Employment Tribunals in the eyes of claimants or prospective claimants.

The new financial penalty scheme is an additional method of enforcement against a company that is available to claimants, however it is unlikely to provide a complete remedy for non-payment, particularly in respect of unpaid awards by insolvent companies.