November 28 2023

Penalty clause

Penalty clause

At a meeting in the House of Commons yesterday, representatives from the CBI, the TUC, the Chartered Institute of Personnel Directors, the Law Society  and the Equality & Human Rights Commission all agreed that the Ministry of Justice needs to ‘go back to the drawing board’ with its proposals for employment tribunal (ET) fees.

The meeting of the Employment Law Parliamentary Support Group, chaired by Kelvin Hopkins MP, heard how the Ministry’s proposed fees would create a substantial barrier to justice, would amount to discrimination against women and disabled people, would damage alternative forms of dispute resolution such as conciliation by Acas, would result in ‘forum shopping’ (i.e. the transfer of many claims, and especially equal pay claims, to the civil courts), and would risk unnecessary and inefficient satellite litigation.

The meeting also heard a remarkable unanimity that the Ministry should withdraw its proposals for substantial fees, with the fee varying according to the type of claim being made, in favour of a modest, flat-rate fee for all claims (i.e. much as I proposed in this blog in February).

However, I took the opportunity to raise another concern, namely the quite incredible fact that four out of every 10 ET awards simply go unpaid by the losing employer.

Put another way, only 60% of those who successfully use the ET system to assert their statutory and/or contractual workplace rights actually receive the compensation that the tribunal has decided is owed to them by their employer (or, most commonly, former employer).

That’s shocking enough when the ET system is free to users.  But a 60 per cent delivery rate is simply unacceptable if users are paying anything from £400 to £1,500 in fees to use the system.  So, something must be done.

Fortunately, the Enterprise & Regulatory Reform Bill, which yesterday began its detailed scrutiny by a committee of MPs, provides a means by which something can be done.  And, as it happens, officials at the Department for Business, Innovation & Skills are already applying their mind to this issue, in relation to the Bill’s provisions (in clause 13) for the imposition of financial penalties of up to £5,000 on losing respondent employers in cases where there are (yet to be defined) ‘aggravating features’.  Given the likely nature of the (rogue) employer in most if not all such cases, a significant proportion of the proposed penalties will simply not be paid.  BIS appears to recognise this.

In my series of reports on non-payment of ET awards for Citizens Advice since 2004, I have suggested that the best approach to such enforcement might be to treat unpaid ET awards (and Acas settlements) as unpaid tax, with enforcement conducted by HM Revenue & Customs.  It’s not inconceivable that such enforcement by HMRC would (more than) pay for itself, as many of the rogue employers who fail to pay an ET award are also not paying the right amount of tax and national insurance.  So, a visit from HMRC in pursuit of an unpaid ET award, Acas settlement or financial penalty could net a much bigger non-payment of tax.

So, as the ERR Bill progresses through Parliament, Citizens Advice is going to be pressing for the addition of a new clause providing for such enforcement of unpaid ET awards, Acas settlements, and the Bill’s proposed financial penalties.