Employers "aggravated" breaches of employment law - £20,000 penalty

Since 6 April 2014, a tribunal has the power to order an employer, who has lost a case, to pay a financial penalty to the Secretary of State where the tribunal considers that a breach of the employee’s rights had aggravating features. With effect from 6 April 2019, the maximum penalty that can be imposed on an employer increased from £5,000 to £20,000.

It is difficult to say with any certainty in what circumstances such a penalty would be imposed because there have been no reported cases as yet.

The explanatory note accompanying the regulations indicates that the test is not the same as the test applied when deciding whether to make an award of aggravated damages in a discrimination claim. The usual language – “that it is for the employment tribunal to decide in each case, taking into account factors it considers relevant, including the circumstances of the case and the employer's”- is used.

However, the explanation that accompanies the regulations sets out factors that tribunals should consider, including, the size of the employer, the duration of the breach of the employment right and the behaviour of both the employer and the employee.

The notes say that it is more likely that an aggravated breach has occurred where the action was deliberate or, committed with malice or, the employer was an organisation with a dedicated human resources team and/or there were repeated breaches. But where the employer has only been operating for a short period of time, or is a micro business or has limited HR functions or made genuine mistakes, it may not be appropriate to impose a penalty.

The minimum penalty is £100. If the tribunal decides to impose a financial penalty and it has made an award of compensation to the employee, the financial penalty must be 50% of the amount of the award, subject to the maximum cap.

An employer does not have to pay the full amount as long as it pays 50% of the penalty no later than 21 days after the date the tribunal sends out the written notice of its decision. The discount is still applied even if the employer has not yet paid the compensation due to the employee.

In December 2018, the government confirmed in its Good Work Plan that they will legislate to introduce sanctions for a "repeat offender", for example, employers who repeatedly underpay employees or disregard the Working Time Regulations. The government has indicated that it may create an obligation on employment tribunals to consider the use of aggravated breach penalties, costs orders and uplifts in compensation if an employer has already lost an employment tribunal case on comparable facts.

All the more reason for employers to ensure employees are treated fairly and its HR practices are up to the required standard.