February 04, 2011
As part of its planned reform of the employment tribunal system, the government is considering introducing fines for employers of 50% of the compensation awarded to the winning party, if they lose a tribunal claim.
The fine would be payable to the Exchequer, in addition to any compensation awarded to the employee but would be capped at £5,000 and reduced by up to half for prompt payment.
Under the current system, costs are not usually awarded awarded against the losing party but applicants must pay a fee to file a claim. The government suggests that the threat of a costs award will encourage employers to have greater regard to their legal obligations and to attempt to settle cases outside of the tribunal.
On the other hand, business groups state that such a fine is disproportionate and unduly penalises businesses at a time when the government is committing itself to creating a more business friendly environment and encouraging businesses to hire more staff and create more jobs.
Employers that are uncertain of their obligations under employment law should seek the advice of a solicitor.
