On 6 April 2016, a scheme was brought in to penalise employers who failed to pay tribunal awards or settlement sums under COT3s. Since the new regime came in then employers have had to pay out more than £83,000 in penalties.

The Government introduced the penalty as they wanted to tackle the increasing failure of employers to pay Employment Tribunal awards.

  • Unpaid Tribunal awards including costs and accrued interest and unpaid settlement amounts also include accrued interest
  • The earliest time to start the procedure to impose a penalty is:

- in relation to unpaid Tribunal awards, when the time for appealing the decision or award has expired without an appeal being made; - in relation to unpaid sums in ACAS conciliation settlements (COT3), once payment has not been received by the date agreed as part of the settlement, as long as the sum is not considered recoverable under the Employment Tribunals Act 1996.

  • An enforcement form will need to be completed, and a warning notice will be issued to the employer stating that a financial penalty will be imposed unless the “relevant sum” is paid by a specified date (which is no less than 28 days from the date of the notice). The warning notice will also explain that the employer has the right to make representations about the unpaid relevant sum or its ability to pay by the specified date. Specific provisions apply where the relevant sum is supposed to have been paid by instalments.
  • If satisfied that the employer has failed to pay the relevant sum before the date specified in the warning notice, a penalty notice will be issued requiring the employer to pay a financial penalty to the Secretary of State by a specified date (which is no less than 28 days from the date of the notice). The penalty will be 50% of the unpaid relevant sum, subject to a minimum of £100 and a maximum of £5,000.
  • If the employer pays both the unpaid relevant sum owed to the Claimant and the penalty within 14 days, the amount of the penalty notice will be reduced by 50%.
  • The employer has 28 days from the date of the penalty notice to appeal to the Employment Tribunal against the imposition of the penalty notice or the amount of the penalty.

It is surprising as to how many awards are unpaid and how much the Government has been able to make in enforcing such awards.

What’s the message?

If you unfortunately get caught up in an employment tribunal case and settle this or have a Tribunal award against you, it is important that you pay within the required time otherwise you could face a further penalty of up to £5,000.