Business groups have reacted with shock to coalition government proposals to fine employers up to £5,000 if they lose an employment tribunal case.
The plans, which are buried in a government consultation paper that is intended to shake up the tribunal system, would result in employers having to pay the Exchequer half the amount of the total compensation awarded to an individual on top of the payout itself. A minimum threshold of £100 and an upper limit of £5,000 are being considered.
The aim is to provide some element of recompense for the costs incurred to the system as a result of the employer’s failure to comply with their obligations. It is the first time that organisations would be penalised for losing a tribunal case.
The document entitled ‘Resolving workplace disputes consultation’, which was unveiled by the Department for Business, Innovation and Skills last week, said: “While we recognise that business will be opposed to such a proposal, we take the view that it will encourage employers to have greater regard to what is required of them in law and, ultimately, will lead to fewer workplace disputes and employment tribunal claims.”
But business groups were stunned by the move included in a paper that pledged to “remove barriers to growth and job creation” and which, they say, threaten to undermine the government’s “pro-business, pro-growth” agenda.
Manufacturers’ association the EEF branded the plans as a “revenue generator”. Steve Radley, director of policy at the organisation, said: “On the day government announced an Employers’ Charter to reassure business about the balance of employment legislation, it undermined this principle by burying a potential new tax at the back of a lengthy consultation.”
Such a ‘double jeopardy’ proposal would impose extra costs at a time when companies are already under immense pressure”, he added.
Abigail Morris, an advisor at the British Chambers of Commerce, told the Daily Telegraph that the plans came “out of the blue”. While it would be reasonable to charge employers a nominal fee of £150 because claimants also faced paying a fee to lodge a case, “anything in the thousands would be unacceptable”, she added.
Tim Gray, an employment partner at law firm Clough & Willis, also found it “astonishing” that the government would say it was introducing new measures to help employers on the one hand, but fine them with the other.
“This is a tax on businesses that make mistakes”, he said, adding that the penalty would place huge pressure on companies to settle out of court, even if claims were spurious, because managers would be afraid of spiralling tribunal costs.