On a cold, grey day in early 2009, I was summoned to a meeting with officials at the headquarters of the Ministry of Justice in Petty France. A few months previously, in response to a series of reports I had written for Citizens Advice since 2004 about the widespread non-payment of Employment Tribunal awards supposedly ‘won’ by CAB clients, the officials had commissioned independent research on the extent of such non-compliance. And they had not hidden from me that they had only done so in full expectation that the research findings would crush my impertinent suggestion, set out in my October 2008 report on the issue, that as many as “one in ten” of all ET awards were not paid in full, and bring an end to my five-year campaign on the issue. Because pretty much everyone, including the TUC, had unhelpfully declared that non-payment of awards was ‘not a problem that we see’. So I entered the building with a heavy heart.
Unfortunately for the officials, the independent research – eventually published in May 2009 – had found that almost five in ten ET awards – 47% – were not paid in full (8% were only part paid, and 39% were not paid at all). And, through gritted teeth, they told me that ministers had concluded that they now had no choice but to act to address this obvious injustice. On my way back to the office, I bought a very big box of chocolates to share with my Citizens Advice colleagues.
Unfortunately for me and the thousands of ET claimants each year who were ‘winning’ their claim only to never see a penny of their award, ministers and officials had no idea how to address this injustice, especially as ministers had made it clear there would be “no new money”. And by 2012 it was clear that the low cost ‘solution’ that we helpfully suggested to them and which they introduced in April 2010 – enforcement of unpaid ET awards by High Court Enforcement Officers under a new Fast Track mechanism – was simply not working anywhere near well enough.
All was not lost, however, as by then the baton had been taken up by Liberal Democrat MP and junior business minister Jo Swinson, who in 2013 commissioned further independent research (essentially repeating that conducted for the Ministry of Justice in late 2008). And, once again, the research found that about half – 51% – of all ET awards were not paid in full (16% were only part paid, and 35% were not paid at all).
This confirmation gave Jo Swinson the leverage she needed to insert into the then Small Business, Enterprise & Employment Bill (later the 2015 Act) provisions that I had first proposed to Coalition ministers in 2012, to no avail, during the passage of the then Enterprise & Regulatory Reform Bill (later the 2013 Act). And between April 2016 and January 2020 the resultant section 150 penalty regime recovered more than £2.5 million worth of previously unpaid ET awards.
Ironically, by the time of the Small Business, Enterprise & Employment Bill in 2014 the ‘policy problem’ of unpaid awards had been largely massaged away by the ET fees regime introduced in July the previous year, as the hefty fees pretty much eradicated the very kind of relatively low-value claim which had tended to result in non-payment of the award. But in July 2017 the fees regime was abolished by a ruling of the Supreme Court, and claim numbers began to bounce back (though not to previous levels – see below).
Also in July 2017, the Taylor Review of Modern Working Practices recommended that, while the section 150 penalty regime established in April 2016 “is a free and successful [sic] route as a first step in prosecuting unpaid ET awards”, employers who do not pay an ET award within a reasonable time should be publicly ‘named and shamed’. And, in December 2018, having accepted this recommendation, the Government established a naming scheme, under which employers would be named by means of “approximately quarterly” press releases.
However, more than four years on, there have been no such press releases and not one employer has been publicly named under the naming scheme. In November 2022, in response to a Freedom of Information request (FoI 2022/27704), the then BEIS (now the Department for Business & Trade) could say only that “naming [employers] is being kept under consideration by the Government”. Yet the Department is still asking ‘successful’ ET claimants who have not received their award to report the employer so that they can be “fined and named online by the Government”.
Furthermore, it is far from clear that the section 150 penalty regime is a “successful route” for enforcing unpaid awards, as suggested by Matthew Taylor in his 2017 report (which, as noted above, was written when the problem had in fact been largely massaged away by the ET fees regime). In response to recent Parliamentary Questions in both the House of Lords and the House of Commons, the Government has declined to provide data on the number of warning and penalty notices issued to employers, and the number and value of unpaid awards successfully enforced, since April 2016. But the above-mentioned BEIS response to a Freedom of Information request states that just 1,123 unpaid awards (worth a total of £6.5 million) were “recovered for claimants” between April 2016 and November 2022.
That Freedom of Information response further states that, as of November 2022, financial penalties with a total value of some £2.3 million had been issued to 1,230 employers since 2019/20. So, how much of that £2.3 million has the Department actually received from employers? And what has it been spending that money on, if not quarterly press releases ‘naming & shaming’ the employers in question?
Unfortunately, there is no available official data on the total number of ET awards made in each year since 2016/17 that could be used to establish the proportion of all awards that have required enforcement action under the s150 penalty regime, even if the Department for Business & Trade were willing to provide data on the number of warning and penalty notices issued to employers. HMCTS only publishes data on the number of awards made in seven jurisdictions: unfair dismissal, and race, sex, disability, religious, sexual orientation and age discrimination. However, this limited data does suggest that the total number of awards has fallen somewhat since the time of my reports on unpaid awards for Citizens Advice.
The annual number of unfair dismissal awards, for example, has plummeted from an average of 2,510 in the four years prior to the introduction of ET fees in 2013, to an average of just 575 in the four years up to and including 2021/22. Similarly, the average annual number of sex discrimination awards has fallen from 150 to 34, the average annual number of race discrimination awards has fallen from 62 to 26, and the average annual number of age discrimination awards has fallen from 25 to 14.
These figures no doubt reflect a number of factors, not least the introduction of mandatory Acas early conciliation in 2014, a long-term decline in the number of new ET cases since 2010, and an associated decline in the number of ET claims that are successful at a hearing or result in a default judgment, which is probably the best available proxy for the total number of monetary awards (though we also have to allow for some of those successful claimants having won claims in more than one jurisdiction – a point to which I return below). In 2022 there were just 32,790 new ET cases (single claims/cases + multiple claimant cases), little more than half the 59,977 in 2012. In the financial year 2009/10 there were 71,300 single claims/cases alone (at that time, HMCTS did not publish data for the number of multiple claimant cases).
As well as a decline in the annual number of new ET cases (and therefore the number of disposals), there has also been a significant fall in the proportion of jurisdictional claims (or ‘complaints) that are successful at a hearing or result in a default judgment, from an average of 18% in the four years prior to the introduction of ET fees in 2013, to an average of 14% in the four years up to and including 2020/21 (data for 2021/22 is not yet available). As a result, the number of jurisdictional complaints that are successful at a hearing or result in a default judgment has fallen significantly, from an average of 42,275 in the four years prior to the introduction of ET fees in 2013, to an average of 13,453 in the four years up to and including 2020/21.
Not every jurisdictional complaint that is successful at a hearing or results in a default judgment will involve a monetary award, but in the absence of official data for monetary awards in jurisdictions other the seven noted above, this is probably the best available proxy for the total number of jurisdictional complaints that result in a monetary award. And we then need to divide this number by the number of jurisdictional complaints per claimant, which in the 27 quarters from April 2016 to December 2022 averaged 1.6 (down from an average of 2.0 in the 12 quarters from January 2013 to December 2015), to arrive at an estimate of the number of claimants who win a monetary award (Row B in the table below).
The most recent government-commissioned research on the non-payment of monetary ET awards – that commissioned by Jo Swinson and published in November 2013 – found that 51% of awards were not paid in full. And, if we apply that proportion to the number of claimants who win a monetary award in each year since 2016/17 (Row B), we get figures for the potential number of ET awards not paid in full (so liable to enforcement action) in each year (Row C in the following table). Note that, in line with the analysis above, these figures are a fraction of the 15,000 figure used in my 2008 report.
In summary, in the period April 2016 to November 2022, there were possibly some 26,000 ET awards that were not paid in full (assuming 4,000 in 2021/22, and 2,000 in April to November 2022). We don’t (yet) know how many warning and penalty notices were sent out by the Department for Business & Trade in this period, but we do know that only 1,123 unpaid awards were recovered for the claimant. Which – if my figures in Row C of the table above are in the right ball park (which they may well not be, for several reasons) – is an enforcement rate of less than 5%.
And if, as the Department suggests in its November 2022 Freedom of Information response, the 1,123 successfully enforced awards were worth a total of £6.5 million, then the some 24,880 unpaid awards that were not enforced were collectively worth as much as £151 million to the workers in question.
Come back you High Court Enforcement Officers, all is forgiven. Indeed, another thing we don’t know is how many people have paid the £71 fee to use the Fast Track enforcement mechanism – which still sits alongside the section 150 penalty regime – since the latter was established in 2016. It seems reasonable to assume that most people will have opted to use the free section 150 penalty mechanism, but we don’t actually know that [see update, below].
On Tuesday 25 April, the Employment Legal Advice Network (ELAN) is holding an online knowledge sharing event on this issue. If you have experience of unpaid ET awards, or would just like to learn more about the issue, please do join us.
Update, 19 May: In answer to a written Parliamentary Question tabled by shadow employment rights minister Justin Madders MP, the justice minister has provided data for 2019-21 confirming that, generally speaking, ET claimants with an unpaid award (or Acas settlement) are not using the Fast Track (High Court Enforcement Officers) enforcement mechanism. Why would they, when they have to pay a £71 fee to do so, but the s150 penalty regime operated by DB&T is free to access? Accordingly, what matters is the effectiveness of the s150 penalty regime operated by DB&T.