Employers face 'business tax' if they lose employment tribunals
Employers that lose an employment tribunal case would be fined 50pc of the award under an “astonishing” proposal buried within a new Government consultation.
discrimination claims at Goldman Sachs and the BBC."/>
The number of tribunal cases rose by 56pc last year, including high profile sex and age discrimination claims at Goldman Sachs and the BBC.
By Louisa Peacock, Jobs Editor 8:00AM GMT 29 Jan 2011
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Organisations found to have breached an individual’s rights would be forced to pay the Exchequer half the amount of the total compensation award, on top of the payout itself, according to the proposal introduced on page 52 of the 88-page document.
The plans threaten to undermine David Cameron’s “pro-business, pro-growth” agenda, lobby groups warned.
An upper limit of £5,000 is being considered, reduced by half for employers that pay within 21 days. It would be the first time organisations would be penalised for losing a case.
Business groups are stunned by the measure which sits within the same document that pledges to “remove barriers to growth and job creation”. It also comes alongside the Government’s new Employer’s Charter, aimed at reducing the burden of employment law.
Manufacturers’ organisation the EEF branded the proposal a “revenue generator”. Steve Radley, director of policy, said: “On the day Government announced an Employer’s 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. [The fine] would impose extra costs at a time when companies are already under immense pressure.”
The British Chambers of Commerce (BCC) said the proposal came “out of the blue”. However, BCC adviser Abigail Morris said it was reasonable to charge guilty employers a nominal fee of about £150, as claimants also faced paying a fee to lodge a case. But “anything in the thousands would be unacceptable,” she said.
Tim Gray, employment partner at law firm Clough & Willis, said: “It is astonishing for the Government to say 'we’re doing this to help employers’ but then introduce a fine. This is a tax on businesses that make mistakes.” He added the penalty would place huge pressure on companies to settle out of court – even when the claims were spurious – as managers would be scared of spiralling costs at tribunal.
The Department for Business estimates the fine would cost employers £5.5m a year. However, experts said the figure was “conservative” given official figures show employers lost 28,500 cases last year and a typical tribunal payout is £4,000, according to ACAS, the conciliation service. Even if employers paid just a £1,000 penalty, that could clock a total yearly “tax” of £28.5m.
The BIS consultation 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.”
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