According to the Department of Business, Innovation and Skills (BIS), approximately one-third of employment tribunal awards went unpaid in 2013. In light of this large proportion of unpaid awards, the government has launched a new scheme, penalising employers who fail to pay tribunal awards or settlement sums. This new scheme came into force on 6 April 2016.
Sarah Begley of the Employment Team at Wilkes explains that the changes were announced in the Small Business, Enterprise and Employment Act 2015 which introduced a scheme to allow for the imposition of financial penalties on employers who fail to pay employment tribunal awards or sums due under an ACAS conciliated settlement.
BIS has now published a new employment tribunal penalty enforcement form in order to facilitate the scheme.
The form can only be completed where the Employment Tribunal judgment was given on or after 6 April 2016 and the Employment Tribunal award has not been received; or where an Acas conciliated settlement was agreed on or after 6 April 2016 which has not been paid. In the case of Tribunal awards, a complaint cannot be made until 42 days after the Tribunal judgment was made. This is so that the employer is given time to submit an appeal if it disagrees with the judgment. For Acas conciliated settlements (called a “COT3”), the form can be submitted if payment has not been received by the date agreed as part of the settlement.
Once the form has been submitted, BIS will issue the employer with a warning notice, informing them that they may have to pay a financial penalty to the government if the award is not paid within 28 days. It is thought that most employers will then pay the award due, in order to avoid the government penalty. Provided the employer pays the award to the employee, they will not be issued with a penalty notice.
If, however, the employer still does not pay the sum owed to the employee, BIS may issue the employer with a penalty notice. The penalty will be equal to half the award that is outstanding at the time the notice is issued, subject to a minimum of £100 and a maximum of £5,000. This is in addition to the sum awarded to the employee, for which the employer remains liable to pay.
If an award still remains outstanding, employees must pursue payment through the civil courts, because employment tribunals are not responsible for the enforcement of the awards they make. Sarah Begley advises that “the ‘traditional’ methods of enforcing an outstanding judgment debt through the civil courts include warrants of execution, attachment of earnings orders, third party debt orders and charging orders.
For further information or to discuss any employment law issues, please contact Sarah Begley or any member of the Employment team on 0121 733 8000.