Why so few financial penalties for aggravated breaches of employment law?

Green Party MP Caroline Lucas asked about penalties in parliamentary questions. Mark Thomas/REX

Only three penalties have been imposed against employers for breaching their legal obligations “with aggravating features” since they were brought in last year, and only one has been paid. Nick Hobden considers why this might be the case. 

In early June, the Green Party MP Caroline Lucas asked during parliamentary questions whether or not any penalties had yet been ordered against employers who had breached their legal obligations “with aggravating features” – a power that was introduced in April 2014 as part of the Enterprise and Regulatory Reform Act.

Nick Boles MP, Minister of State for the Department of Business, Innovation and Skills (BIS), responded that three aggravating features penalties had been imposed, but only one of these had been paid.

What is intriguing is that this is not the first time the penalties have been subject of parliamentary questions, but why is this number so low?

In December 2014, Jo Swinson, then a BIS minister, was asked the same question. She confirmed that there had been no penalties imposed for aggravating features at the time.

Clearly, the penalty has been slow to get off the ground as just three have been ordered in the past six months. Without access to employment tribunal judgements, we can only guess when they were ordered and what aggravating circumstances there were in each case.

Employment judges have either been hesitant to impose these penalties or they just did not pick up any aggravating circumstances, thanks, in part, to the reduced number of tribunal cases since the introduction of fees in July 2013.

There is a little bit of déjà vu here, because many HR practitioners will be aware that tribunals rarely award costs against a losing party, unless their claim, response or conduct of the tribunal proceedings is unreasonable.

More and more tribunal judges are making costs awards against the losing party and those can include the tribunal fees that have been paid at the start of proceedings and before the case is heard.

What are aggravating features?

The penalties themselves were introduced to give tribunals the power to award a penalty against an employer, under section 16 of the Enterprise and Regulatory Reform Act 2013, introducing section 12A into the Employment Tribunals Act 1996.

The punitive award is made against a losing respondent employer (not employee), only where a tribunal considers that an employer has acted in a way where its breach of the employee claimant’s rights has one or more “aggravating features”.

This penalty can be ordered even where no financial award has been made against the employer and can apply to claims issued on or after 6 April 2014, by the employee, where his or her employer has exhibited aggravating features in its response to the claim.

“Aggravating features” have not been defined in the legislation, but the tribunal will take into account a number of factors in considering whether or not an award will be imposed. This will include the employer’s circumstances, such as:

  • its size and behaviour;
  • the duration of the breach; as well as
  • the HR resources available to the employer.

The tribunal will be interested to know whether the respondent employer’s actions were:

  • deliberate; or
  • malicious; and
  • whether or not the employee’s rights were breached repeatedly.

The penalty levied will be a minimum of £100, up to a maximum of £5,000. In a case where a financial award has been made, it will be equal to 50% of the financial reward (subject to the above cap). The penalty is paid to the Secretary of State for Business, Innovation and Skills.

The penalty is reduced if 50% if paid within 21 days of the written notice of the tribunal’s decision. It is a little like parking your car in a car park without a valid ticket or on a yellow line, but throw in malice and aggression towards the act of illegal parking or being stroppy towards the parking warden and you get the picture.

Tough on bad behaviour?

Perhaps a penalty of between £100 and £5,000 is not much of a disincentive to stop malicious behaviour on the part of employers towards employees.

On the other hand, it is safe to assume that most employers do not engage in the kind of conduct that this penalty is designed to address.

That said, it is clear that the Government wants to appear tough on unreasonable behaviour by employers and that might also explain why there are going to be amendments to the ETA 1996 (new part 2A) contained in the Small Business Enterprise and Employment Act 2015, which is yet to be introduced.

This will provide a new regime of (yet more) fixed penalties for employers who do not pay tribunal awards or settlement sums.

In addition to aggravated features fines, this other legislative change followed the revelation in 2013 that one-third of tribunal awards remained unpaid by employers.

Is this due to insolvency or simply ignoring the judgements of the tribunal? It’s not clear.

Nevertheless, in the same way as the aggravated features fine can be between £100 and £5,000, so the new enforcement regime allows for a penalty of 50% of the unpaid relevant sum, subject to a minimum of £100 and a maximum of £5,000 payable to BIS. Again, this penalty can be reduced by 50% on payment within 14 days.

So, for employers wanting to avoid up to a £10,000 fine, the moral of the story is simple: do not be aggravating towards your employees and pay tribunal awards made against you.

About Nick Hobden

Nick Hobden is head of employment law at south-east regional law firm Thomson Snell & Passmore in Tunbridge Wells and Dartford in Kent.
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