Employment tribunals – payment of financial compensation

Claimants who bring a claim against an employer in an employment tribunal have recourse to a number of different remedies. In the majority of cases, a claimant will be seeking financial compensation and the tribunals have the power to award different levels of compensation, depending on the type of claim brought. This article summarises the types of financial awards that are typically made by tribunals and considers the risks for employers if they fail to comply with an order to pay compensation.

Typical awards

In successful unfair dismissal claims, for example, compensation will usually consist of a “basic” and “compensatory” award. The basic award will be calculated by reference to the employee’s length of service, weekly pay (subject to a statutory maximum) and age. The compensatory award will broadly reflect the successful claimant’s financial losses arising from the dismissal, with such compensation being capped at a statutory maximum amount. An important factor for tribunals when making such awards will be the extent to which the employee has “mitigated” his or her losses by, for example, taking steps to find alternative employment.

In discrimination cases, an award for injury to feelings can be made (in addition to an award reflecting the claimant’s financial losses). This will be assessed by reference to applicable “bands” of compensation, established through previous cases.

Payment of compensation

If, after a tribunal orders compensation, an employer fails to pay within the period specified for payment, the employee must take enforcement action in the civil courts. Employment tribunals do not have the power to enforce such orders themselves.

Recent research by the Ministry of Justice (Research into Enforcement of Employment Tribunal Awards in England and Wales, May 2009) has shown that in 39 per cent of cases, awards are not paid by employers and that in only 53 per cent of cases is the compensation paid in full. However, following a recent change in the law, from 1 April 2009 employers that fail to pay employment tribunal awards and who have enforcement proceedings brought against them will be added to the “Register of judgments and fines”. This register is accessible by the public. This is a strong incentive for those employers that have been ordered to pay compensation to ensure that the tribunal’s order is complied with.

Victimisation

A further incentive for employers is provided by a recent decision of the Court of Appeal, which upheld a claim of victimisation where an employer had failed to pay a tribunal award. In this case, the claimant successfully claimed race discrimination and unfair dismissal against an ex-employer. When the employer failed to pay the compensation awarded by the tribunal, the claimant brought a further claim of victimisation on the grounds that his employer had deprived him of his award and thus subjected him to less favourable treatment in comparison with other creditors who had been paid in full for the money owed to them. He claimed that this treatment was retaliation by his ex-employer for having brought and won a discrimination claim against it.

In the first case of its kind, the Court of Appeal had to determine whether non-payment of a tribunal award could amount to a form of victimisation, and it was decided that, in principle, it could (however, no finding was made by the court as to whether victimisation had occurred in this particular case).

Conclusion

These developments reinforce the message that it is far better to seek to address employment disputes internally and at an early stage so as to avoid the risks and potential financial consequences of legal proceedings.