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Penalties for Employers for Unpaid Tribunal or Settlement Awards

Comment from Brabners TEAM Legal Service Provider - In a written answer in Hansard (the official transcripts of Parliamentary debates) the Government has announced that it expects Section 150 of the Small Business, Enterprise and Employment Act 2015 to come into force from April 2016. Section 150 will provide that financial penalties can be imposed on employers for failure to pay employment tribunal or settlement award sums.

Despite the introduction of a fast-track system in the civil courts for bringing a claim for an unpaid award, and attempts by the Ministry of Justice to document the options for enforcement which are available to employees, unpaid awards continue to be a concern for the Government.

Section 150 amends the Employment Tribunals Act 1996 through Part 2A (Sections 37A-37Q), which will introduce a new scheme of penalties for unpaid awards. The scheme will operate as follows:

  • There will be costs and accrued interest imposed on unpaid tribunal awards, and accrued interest imposed on settlement awards.
  • An enforcement officer will issue the employer with a warning notice, which provides the employer with a time period (at least 28 days) in which they must pay the award. The employer is given the opportunity to make representations regarding its inability to pay, or the amount of the sum.
  • If the employer does not pay the award within that time period, the enforcement officer can issue a penalty notice which requires payment of a penalty of 50% of the unpaid amount of the award, subject to a minimum of £100, and maximum of £5,000, by a specified date (at least 28 days). This money is payable to the Secretary of State, and not to the employee.
  • The employer has a 28 day period from the date of the penalty notice to appeal the penalty to an employment tribunal if it so desires. If so, it must use one or more of the specified grounds for appeal.
  • If the employer pays the penalty notice amount and the amount of the award within 14 days of the date of the penalty notice, the penalty notice amount is reduced by 50%.