Hitting the news last week was the fact that Lucy Ward, former Leeds United employee, had still not received the compensation awarded to her by the employment tribunal months ago. At the time, we reported on her successful claim of unfair dismissal and sex discrimination against the Club. If you missed our article, check it out here.
Unfortunately, Ms Ward is part of a worrying statistic that a high proportion of claimants who are awarded compensation by the employment tribunal do not receive the money. Less than half of all claimants receive their compensation in full, some receive only a small amount of the compensation awarded and over a third receiving absolutely nothing. So, why does this happen?
Pursuing an employment tribunal claim against an employer is often a lengthy and stressful process for claimants. The employment tribunal aims to bring claims to a conclusion within 6 months but the reality, particularly with complex claims, is that even twelve months down the line some claimants have still not had their day in court. Unfortunately, even where claims are successful, a Judgment does not necessarily signify the end of the matter.
With the present economic climate, it is not difficult to understand why some employers find themselves in financial difficulties and if a company goes into liquidation before the compensation is awarded or shortly afterwards, there is often no money ‘in the pot’ to pay a successful claimant, who will be an unsecured creditor. Unfortunately, for a small number of claimants, we hear that their employer has put themselves into liquidation only to set up a new company, with a new name, which trades from the same premises selling the same products or providing the same services. It can be difficult for these unluckily claimants to receive advice that their claim exists against the old company and not the new one and the costs in challenging the validity of the old company’s liquidation may in fact outweigh the compensation they are hoping to recover. Not to mention the difficulty in proving the company’s actions were a deliberate attempt to avoid liability for the payment of compensation.
Obviously the news will raise concern for current and future claimants. If an employer is in financial difficulties before a claimed is even commenced, it casts doubts about whether a claim should be pursued. Legal Expenses Insurance policies will often not cover claims where the financial viability of the employer is in question. Likewise, damages based agreements (often known as ‘no win, no fee’ agreements) are unlikely to be available to claimants in these circumstances. It will often mean the claimant faces the difficult decision of pursuing the claim without legal assistance or funding legal fees themselves in the knowledge that compensation awarded may not be recovered. Having likely already experienced difficulties at work which may give rise to a claim, these additional factors could be an added burden for claimants to consider.
The Government has previously committed to trying to address this problem and, in April this year, introduced fines for employers who fail to pay compensation awarded. This penalty system is in its early days so the true impact cannot yet be assessed. It is however likely that further measures will need to be introduced in the years that come. Commentary on the subject has included suggestions that disqualifying directors, allowing the employment tribunal to enforce payment directly and denying businesses the opportunity to work on public sector contracts could all incentivise employers to ensure compensation awarded is paid.
Please note that the information in this blog is to provide information of general interest in a summary manner and should not be construed as individual legal advice. Readers should consult with SCE Solicitors or other professional counsel before acting on the information contained here.
SCE Solicitors is a boutique employment law practice based in Leeds which advises clients nationwide. Please note that the information in this blog is to provide information of general interest in a summary manner and should not be construed as individual legal advice. Readers should consult with SCE Solicitors or other professional counsel before acting on the information contained here.