s12A of the Employment Tribunals Act 1996 permits Employment Tribunals to order employers to pay a financial penalty if they have breached a workers employment rights and there are “aggravating features”. This sum ordered is paid to the government and is in addition to any compensation ordered to be paid to the Claimant.

Until the 5th April 2019 the penalty was limited to £5,000.00 maximum; however if the breach occurs on or after 6th April 2019 the limit is increased to £20,000.00. This four fold increase is due to an amendment in the Employment Rights (Miscellaneous Amendments) Regulations 2019

The penalty’s level depends on the award made to the Claimant as it is capped at 50% of what is paid to the claimant, further, if the employer pays the penalty within 21 days they will receive a 50% reduction to the penalty.

As noted in a recent Employment Appeal Tribunal decision, the power has not received any substantial attention from the Employment Appeal Tribunal; and it should be noted that there is no guidance as to what amounts to “aggravating features” beyond that set out in the Explanatory notes to the Enterprise and Regulatory Reform Act 2013:

100. Section 12A does not prescribe the features which employment tribunals should take into consideration when determining whether a breach had aggravating features; this is for the employment tribunal to decide, taking into account any factors which it considers relevant, including the circumstances of the case and the employer’s particular circumstances. The employment tribunal should only take into account information of which it has become aware during its consideration of the claim. A non-exhaustive list of factors which an employment tribunal may consider in deciding whether to impose a financial penalty under this section could include the size of the employer; the duration of the breach of the employment right; or the behaviour of the employer and of the employee. The concept of aggravating features in section 12A is not the same as the existing regime of aggravated damages in discrimination claims in England and Wales.

101.An employment tribunal may be more likely to find that the employer’s behaviour in breaching the law had aggravating features where the action was deliberate or committed with malice, the employer was an organisation with a dedicated human resources team, or where the employer had repeatedly breached the employment right concerned. The employment tribunal may be less likely to find that the employer’s behaviour in breaching the law had aggravating features where an employer has been in operation for only a short period of time, is a micro business, has only a limited human resources function, or the breach was a genuine mistake.

Employers should bear this in mind when facing tribunal proceedings and it may be a matter they wish to factor into their risk/return calculation in defending any claim