Employers found to have breached an employee's rights by an employment tribunal should have to pay a penalty to the government of one-half the amount of the total compensation award, on top of the payout itself, according to a proposal introduced on page 52 of an 88-page government consultation document.
If the government accepts the proposal, it would be the first time organizations would be penalized for losing a case.
A minimum of £100 and an upper limit of £5,000 is being considered, reduced by half for employers that pay within 21 days.
The aim is to provide some element of recompense for the costs incurred to the system as a result of the employer’s failure to comply with their obligations.
“While we recognize that business will be opposed to such a proposal, we take the view that it will encourage employers to have greater regard to what is required of them in law and, ultimately, will lead to fewer workplace disputes and employment tribunal claims," states the document entitled "Resolving workplace disputes consultation," which was unveiled by the Department for Business, Innovation and Skills at the end of January.
The same document pledges to “remove barriers to growth and job creation."
The penalty seems to be at odds with the government's new Employer's Charter aimed at reducing the burden of employment law, said employer groups, with the EEF, a manufacturers’ organization, branding the proposal a “revenue generator.”
“On the day government announced an Employer’s Charter to reassure business about the balance of employment legislation, it undermined this principle by burying a potential new tax at the back of a lengthy consultation. [The fine] would impose extra costs at a time when companies are already under immense pressure," said Steve Radley, EEF director of policy.
Employers lost 28,500 cases last year and a typical tribunal payout was £4,000, according to ACAS, the conciliation service. Even if employers paid just a £1,000 penalty, that could result in £28.5 million per year.
The British Chambers of Commerce (BCC) said the proposal came “out of the blue”.
However, it is reasonable to charge guilty employers a nominal fee of about £150, as claimants also faced paying a fee to lodge a case, said BCC adviser Abigail Morris. But “anything in the thousands would be unacceptable,” she said.
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