Employers under fire again with new tribunal changes

Financial Penalties for Employers who lose at Tribunal
From April 2014 Tribunals will be able to impose a levy on Employers who lose at Tribunal. Hot on the heels of imposing fees for Claimants who bring a claim, this new measure, at first glance seems to wipe out any good intentions the government may have had for employers facing tribunal claims.
The levy will be at the Tribunal’s discretion and will be payable to the Treasury, not the Claimant, leading to some branding it as a ‘loser’s tax’. Once the Tribunal has decided to implement the level it must be 50% of the amount of the compensation awarded, up to a cap of £5,000. There will be a 50% discount for employers who pay within 21 days of the tribunal’s decision, which strikes as vastly unfair for employers with cash flow issues having just lost at tribunal.
The Tribunal will only be able to use the new powers where the employer’s behaviour in committing an employment law breach has ‘aggravating features’. This has yet to be properly explained or defined by the legislation, again leaving much to the tribunal’s discretion. This measure is supposed to reassure employers who make a ‘genuine mistake’.
Although the size and resources of the employer will be taken into account when considering the penalty, there is scope for this penalty to hit an employer hard financially. Any employer will tell you the cost of a tribunal to a business can be extortionate, not only are they faced with legal fees, a drain on their time, resources and staff but also the potential for a pay-out to the employee. With this penalty on top, there is a risk of a ‘price on justice’ scenario where employers are just not prepared to defend themselves due to the financial risk involved. The situation is even more agonizing for the employers who bite the bullet and win, only to walk away from the tribunal with nothing more than a judgement in their favour and a large legal bill.
With mandatory pre conciliation looming Claimants are likely to use the penalty as bargaining tool to encourage early settlement and to pressure employers into ‘commercially’ settling a case rather than seeking the justice they believe they are entitled to.
The government’s aim to reduce the number of tribunal claims is clear, however it is disputed whether this is the correct way of achieving this aim. Already we are seeing firms and companies willing to loan claimants their fees to bring a claim, making this measure almost redundant in some cases, and again increasing the burden on employers.
It is hoped that the Tribunals use their discretion sparingly and for the worst case scenarios where an employer genuinely behaves in a reproachable manner. These levies should not be implemented without serious due consideration, as the knock on effect on the tribunal system could be colossal.