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Government to crack down on non-payment of tribunal awards

Employment Law & HR
BG Purple

Claimants might think the hard work is over once they receive a tribunal judgment confirming that they were treated unfairly by their employer.

However, research commissioned by the Ministry of Justice in 2009 revealed that a total of 39% of employment tribunal awards go unpaid by employers. The study showed that a whopping 50% of payments over £5,000 were unpaid and that 1 in 10 large employers refuse to pay tribunal awards. 

The dismal figures prompted the then Justice Secretary, Jack Straw, to introduce the Fast Track enforcement scheme in 2010. This gave high court enforcement officers the power to recover unpaid awards from errant employers. Four years on the effects are yet to be seen, with just over 50% of claimants are even aware of the scheme’s existence. 

The latest research from 2013 showed that just over half of all claimants received full or part payment. In the consultation that followed, various solutions were proposed including “naming and shaming” the big companies who refuse to pay the awards and the introduction of financial penalties for late payments. 

The latter suggestion is included in the Small Business, Enterprise and Employment Bill 2014 which received its first reading in Parliament earlier this month. The 2014 Bill proposes a new scheme whereby an employer will face a financial penalty of 50% of the outstanding award if they do not pay up.  

The scheme mirrors the new employment tribunal fine system put in place earlier this year. Under that scheme, an employer could face a fine because of their behaviour leading up to the tribunal or during the tribunal process. Both types of fine are subject to a minimum of £100 and maximum of £5,000. Under the new enforcement fine scheme, if both the award and fine are paid within 14 days the penalty will be reduced by 50%. 

Of course, many employers currently pay the tribunal settlements awarded against them. While the Bill aims to improve employees’ rights it is unclear whether, in reality, the scheme will actually help more claimants receive their full award. The research shows that the most common reason for non-payment (37% of cases) is because the employer is insolvent. Clearly in those cases this measure will be of little use to these claimants.

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