You might think that the introduction of a power for employment tribunals to impose a (moderate) financial penalty, in addition to an award, on ‘repeat offenders’ and rogue employers who fail to engage with the tribunal system would be pretty non-controversial. But you’d be wrong, as Clause 13 of the Government’s Enterprise & Regulatory Reform Bill has attracted robust criticism from all sides.
In June, in their oral evidence to the committee of MPs examining the Bill in detail, the Federation of Small Businesses (FSB), the Institute of Directors and the EEF (the manufacturing employers’ organisation) all highlighted Clause 13 as an aspect of the Bill to which they are especially opposed. In its written evidence to the Committee, the British Chambers of Commerce went so far as to suggest that the measure could ‘result in a more risk-averse attitude to employing people altogether, particularly amongst [small employers]’. And, just this week, the Employment Lawyers Association attacked Clause 13 on the grounds that the existence of a discretionary power to impose such a penalty would ‘introduce yet another factor into a settlement negotiation’ and, as a result, ‘disputes would drag on rather than settle’.
Citizens Advice has so far supported Clause 13, though without much enthusiasm. Ministers ‘do not expect the power to be used frequently’, and so it is hard to see how limited use of the power will do much, if anything, to encourage compliance with employment law by the kind of rogue employer at which it is aimed.
So I find myself wondering whether this unpopular and arguably ineffectual measure could, with a bit of adaptation, be put to better use. How about restricting the imposition of financial penalities to those employers who fail to pay an employment tribunal award?
Research commissioned by the Ministry of Justice, published in 2009, found that no less than 49% of all employment tribunal awards go unpaid in the first instance (i.e., without enforcement action). This shocking finding led the Ministry to introduce, in April 2010, the so-called ET & Acas Fast Track enforcement regime, under which workers can pay a fee of £60 to have their unpaid award or settlement enforced by one of the various firms of High Court Enforcement Officers (HCEOs). But that regime has proved to be a huge disappointment, with fewer than one in five of those with an unpaid award paying to access the regime, and the HCEOs enforcing just 50 per cent of the awards and settlements referred to them. And, as far as anyone knows, the overall rate of non-compliance with awards has not changed since 2009.
During the Bill’s committee stage, the BIS employment relations minister, Norman Lamb MP, acknowledged that this is ‘unsatisfactory [and] we have to look at ways to improve the enforcement of awards, so that those claimants found to have been unfairly treated or discriminated against get the compensation awarded to them’. Noting that it is ‘abhorrent for companies and employers not to pay awards that have been properly made by the tribunal’, the Minister reiterated his desire to ‘look for ways to improve the situation’.
Well, here’s one possible way: rework Clause 13, so that the proposed penalties are applied where, and only where, an award is not paid within a specified, reasonable period (42 days, say). Employers’ bodies such as the CBI, FSB and BCC could hardly object to that – it cannot be in the interest of their law-abiding members that rogue employers can get away with non-payment of an award. And, if Ministers believe their own rhetoric about how the penalties, as currently proposed, would improve compliance generally, they must surely accept that penalising those who fail to pay an award would also work to the good, by creating an incentive to pay promptly.
Richard Dunstan is a policy wonk who has worked for Citizens Advice, the National Audit Office, the Law Society, and Amnesty International UK.