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Will Tribunal fines increase out of court settlements?

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Will Tribunal fines increase out of court settlements?

The recent increase to maximum employment tribunal awards now means that an employee can be awarded up to £68,400 for their losses caused by unfair dismissal.

In addition, the Government is proposing to impose penalties of between £100 and £5,000 on employers that lose unfair dismissal claims.

The Government’s reason for changing the Workplace Dispute system is to reduce the volume of claims and to streamline the tribunal process; which is obviously welcome news.

Many companies I have spoken to have suggested this new proposal might encourage them to settle out of court to avoid paying the extra fine. This could lead to companies feeling pressured into making an offer, simply to avoid the extra financial burden.

It is important to point out that the consultation period for the proposed penalty ends 20th April 2011 and I suspect that, should this become law, it will not come into effect until April 2012. Nonetheless the increase in employment tribunal awards and proposed penalty come at a tough time for business as statistics from the Tribunal Service show that claims are at record levels, with 236,000 employment tribunal claims being received in the year up to March 2010.

Regardless of the outcome of the consultation, the Government is sending a clear message to all businesses – comply with your employment law obligations, or face a hefty fine. Obviously an increased emphasis on prevention rather than cure is advisable so you should take a close look at your company’s rules and procedures regarding Employment law. They should clearly outline your organization’s discipline and grievance policies and should be regularly updated.

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