Category Archives: Attitude towards risk

Counting the cost of discrimination

Megaphone - Hot Off the Press (123rf ref 8981071)The cost of litigation is always a concern for employers and never so more than in discrimination claims. Employers should never underestimate the cost and disruption a discrimination claim can give rise to. Discrimination claims are often complex and take more than a single day to be heard.  On top of the legal costs involved in defending a claim, there are the hidden costs of absent managers who have to attend to give evidence and reputational damage to the business itself.

In order for employers to assess their attitude towards risk and what the approach should be to preventing discrimination in the workplace it is helpful to understand the consequences of getting it wrong.   Compensation awarded in a discrimination claim is not subject to the statutory financial limit, which a standard unfair dismissal claim is subject to and is uncapped in relation to financial loss.  Compensation may also include a separate award for injury to feelings; the amount awarded depends upon the severity of the case. The maximum award usually sits at £30,000 for the most serious of cases, with cases involving one off minor incidents achieving up from £600.   Damages for personal injury can also be claimed as part of a discrimination claim; for employers who have been found to have acted in a high handed or oppressive way aggravated damages can be awarded.

This is not the end of the matter.  In cases presented on or after 6 April 2014, the Employment Tribunal will have the power to impose financial penalties on employers who lose in the following specified circumstances:

  • where the employer’s breach has “one or more aggravating features“; and
  • even if a financial award has not been made.

It is not clear how the employment tribunal will determine what amounts to “aggravating features”. The government has suggested penalties would be imposed where “the breach involves unreasonable behaviour, for example where there has been negligence or malice involved”. Further guidance has suggested that relevant factors could include the circumstances of the case, the size of the employer, the duration of the breach of the employment right, and the employee and employer’s behaviour.

The minimum penalty will be £100 and the maximum £5,000.  If a financial award has been made, the financial penalty must be 50% of the amount of the award (subject to the minimum and maximum caps).  An employer will not have to pay the full penalty if it pays 50% of the penalty within 21 days.  Employment tribunals will be required to take account of the employer’s ability to pay.

The penalty will be paid to the Secretary of State, who will pay the money into the Consolidated Fund (the government’s general bank account in the Bank of England).

Whilst financial penalties may be awarded in any type of claim, by their very nature discrimination claims are likely to present employment tribunals with their first opportunity to issue the new penalty.

On the upside employment tribunal claims are down. The introduction of tribunal fees from 29 July 2013 may deter some individuals from pursuing a claim.  In a discrimination claim, claimants have to pay an issue fee followed by a hearing fee (usually £250 and £950 respectively).

There is some comfort for employers as from 6 May 2014, claimants will not be able to automatically bring a claim. Claimants will have to utilise the new compulsory pre-claim Acas conciliation process by submitting details of their dispute to Acas before bringing their claims, at which point they will be offered pre-claim early conciliation (“EC”) for a period of one month. If it is refused by either party, or is unsuccessful, the claimant will be able to go ahead and present their claim to the employment tribunal. If the parties enter into EC this will “stop the clock” on the limitation period to present the claim to the employment tribunal.

If things do go wrong, which sometimes happens, EC may provide an employer with an early opportunity to settle the dispute more cost effectively on a confidential basis and at the same time avoid stressful costly litigation and the possibility of a financial penalty.  EC is free to both parties.

No employer can prevent a disgruntled employee or ex-employee from pursuing a discrimination claim. Likewise, an employer does not want to have to pay a financial penalty to the government.  Whilst EC may be one option for resolving a workplace dispute, there are many measures that can be implemented to reduce the risk of the business having to take the full force of a successful claim.  Zero tolerance on discrimination, bullying and harassment in the workplace, supported by clear consistently applied policies and procedures and training can go a long way to assist an employer to defeat a claim.