Financial Penalties for Employers

May 03, 2016
The Enterprise and Regulatory Reform Act 2013 (“the Act”) has introduced new powers for an employment tribunal to impose financial penalties on employers for breaching workers rights, where the breach has one or more “aggravating features”. The Act provides a non-exhaustive list of examples of aggravating features including malicious or persistent breaches of workers’ rights. 

Where a claimant has been awarded compensation by the tribunal, the penalty must be half the amount of compensation awarded subject to a minimum of £100 and a maximum of £5,000 and is payable to the Secretary of State. However, the tribunal retain discretion as to whether or not to impose a penalty.

Since its introduction very few penalties have been imposed, meaning that there is still relatively little guidance as to what will constitute a sufficient breach to justify a penalty. However, the few cases that have been decided provide us with some detail as to the factors a Tribunal will take into consideration as outlined below: 

In Nunn v Civil and Groundwork Contractors Ltd, the employer sent Mr Nunn a text telling him that he could no longer use the company van as he could not work on a Saturday. In an attempt to resolve the issue Mr Nunn offered to work on Saturdays, however this was rejected. Mr Nunn resigned and was successful in a claim for constructive dismissal and the tribunal awarded him over £20,000 in compensation. The employer was also ordered to pay a penalty of £5,000 (the statutory maximum) on the basis that the decision to withdraw the van had been “both arbitrary in terms of decision-making and peremptory in its manner of execution”.

In Elezaj v Attitude Event, although the employee failed to establish that she had been unfairly dismissed for making a protected disclosure/whistleblowing, the upheld her claims for various outstanding payments and unpaid holiday pay. She was awarded £1,681.25 and the employer was also ordered to pay a penalty of £840.62. The tribunal took into consideration the employer’s failure to respond to the employee’s queries about pay and the process by which it removed her from its books. 

Although case law has not yet provided us with a hard and fast rule as to when a penalty will be imposed, the number of penalties being imposed is on the rise and should always be borne in mind when dealing with employment disputes. 

Joanna Sutton

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Joanna Sutton

Joanna qualified as a solicitor in 2010 and joined Nockolds as a Senior Associate in March 2016 having previously worked and trained at another firm ...

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