Employers may face penalties for breaching employment rights as part of the Enterprise and Regulatory Reform Bill.

The UK Government has published the Enterprise and Regulatory Reform Bill which will, if passed, make significant changes affecting how workplace disputes are dealt with. Audrey Williams, partner at international law firm Eversheds, comments:

“There is little in the Bill that should come as any surprise to employers given that the Government had already announced its intentions some months ago. Having said that, there is one aspect of the Bill that has not been publicised previously. If passed, the Bill will give government ministers power to revise the cap on so called ‘compensatory awards’ that employers can be ordered to pay for unfair dismissal. This suggests the government could well be planning to reduce the cap to bring down the level of awards at the upper end of the scale, at least for smaller employers, if not for all. In practice most compensation awards fall well below the upper limit. Nevertheless, employers will undoubtedly welcome any move to reduce the cap, which currently stands at £72,300.

“Less welcome, at least so far as employers are concerned, will be the introduction of financial penalties for employers who have breached employment rights. Any penalty will be payable to the Secretary of State, on top of any compensation due to the employee and will be fixed at 50% of the compensation awarded, with a 50% discount for prompt payment, subject to a minimum penalty of £100 and a maximum of £5000. The Bill says that a penalty can only be ordered where there have been ‘aggravating features’. Unfortunately, no attempt is made to define what this means; so employers will be at the mercy of tribunals. This new element of uncertainty could well push employers into settling claims they might otherwise have chosen to defend.”