Financial Penalties for Employers and Settlement Agreements.

There are a number of changes coming into force on 6 April 2014. One change which could prove to be in an employee Claimant’s favour is in relation to a new power that the Tribunal will be granted. Employment Tribunals will have a new discretionary power to impose financial penalties of between £100 and £5,000 on employers who lose Employment Tribunal claims where there are “aggravating features” present. Aggravating features is not defined and ultimately this will be for the Employment Tribunal to decide taking into account any factors which it considers relevant, including the circumstances of the case and the employer’s own particular circumstances. Employment Tribunals will be able to impose the penalty irrespective of the nature of the remedy awarded to the Claimant, although where a financial award is made the penalty must be 50% of that award (subject to the overall cap of £5,000). The employer's ability to pay the penalty must also be taken into account. Explanatory notes to the legislation provide non-exhaustive guidance on the sorts of matters that may be taken into account. Factors more likely to lead to the imposition of a penalty are where the employer is a large organisation with dedicated HR Support, where there are long or repeated breaches of employment laws or deliberate, malicious or negligent behaviours. Mitigating factors less likely to lead to a penalty include it being a small or newly-established employer with limited HR support; short or one-off breaches and/or where the matters complained of amount to honest mistakes. Although there may be a temptation for employees to rely on this extra award in cases where, given past behaviour, there is a strong chance that an employer may well behave badly, one must remember that it may be some time before such financial penalty is imposed on an employer. Even if a financial penalty is imposed, it is likely that this would be challenged by the employer on appeal. Whilst it should be considered, it would not be wise to bank on such an award when considering a Settlement Agreement offer at an early stage.
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