Time to pay up for Employers?

HRC Law can help you and your business with employment or HR issues, including claims and potential claims in the Employment Tribunal

From April 2016 the Government plans to bring into force new provisions to impose financial penalties on respondent employers who’ve failed to pay an employment tribunal award.

New sections inserted into the Employment Tribunals Act 1996 by the Small Business, Enterprise and Employment Act 2015 will give an enforcement officer the power to issue a “warning notice” if any such sums (including any due instalments) remain unpaid.

The provisions will also apply to unpaid settlement sums agreed to be paid by an employer to a worker under a compromise in respect of which a certificate has been issued under section 19A (i.e. sums due under a COT 3).

The warning notice will warn of the officer’s intention to impose a financial penalty unless the employer pays what’s owed by a specified date (which is no less than 28 days after the date of the notice). It will also explain how much the penalty will be and that the employer can make representations (about the penalty and/or about his or her ability to pay by the specified date).

If the outstanding monies remain unpaid, the enforcement office will then be able to serve a “penalty notice”, imposing a financial penalty on the employer. This will be 50% of the unpaid amount (with a minimum penalty of £100 and a maximum of £5,000).

The penalty notice will set out how much is due (in respect of the original award/settlement sum), what the penalty is, and how and when these sums should be paid. It will also explain about the option of paying a reduced penalty (if the employer pays what they owe and pays 50% of the penalty within 14 days of the notice); set out what the consequences of non-payment will be; and advise the employer of their right to appeal against the notice or the amount of the penalty.

Unpaid awards are a problem. A BIS survey of claimants who’d been successful at the Employment Tribunal in 2013 found that over a third of awards were completely unpaid and only half of those claimants who were paid were paid without having to take enforcement action.

Anyone who’s tried to enforce a civil award will know how difficult and frustrating it can be. Corporate insolvency and the tendency of some companies to “pull a Phoenix” (voluntarily dissolve, then rise from the ashes in a different guise – their old liabilities shed like a snake’s old skin) make it even harder.

Given that employers who haven’t paid Employment Tribunal awards in a timely manner are likely to be smaller employers with limited resources (or even insolvent ones) one wonders whether the “pay now or have an even bigger debt” threat will work in practice.

The whole thing makes me think of parking tickets, or fixed penalty notices for littering, dog- fouling or the like. Surely now that claimants are paying fees to bring claims in the Employment

Tribunal, they’ll want more comfort that if they do win an award, they’ll have a (better than 50%) chance of seeing the colour of their (former) employer’s money?

By HRC Law

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