From April, employment tribunals will have discretion to impose financial penalties on employers who lose claims. It's perhaps a surprising move for a government that trumpets its pro-business credentials.
The penalty will be in addition to whatever damages are payable to the claimant. The amount will be half the amount of compensation awarded, subject to a maximum of £5,000, with a 50% reduction if paid within 21 days.
Penalties will only be imposed, however, where the employer's breach has 'aggravating features'. This has not been defined or explained and it remains to be seen what approach tribunals will take.
Indications suggest a penalty may be more likely where, for example, the employer's action was intentional or malicious, or where it had repeatedly breached the employment right concerned.
Significantly, penalties will be payable to the Exchequer rather than to the employee who has been subject to the employer's conduct. Yet won't the regime simply ratchet up the cost of settling cases, with claimants expecting a higher pay-off in return for the employer avoiding the spectre of a penalty?
Michael Burd and James Davies, Lewis Silkin LLP solicitors, email: firstname.lastname@example.org.