Citizens Advice is the national body for Citizens Advice Bureaux (CABx) in England, Wales and Northern Ireland. The CAB service is the largest independent network of free advice centres in Europe, with 430 main bureaux in England, Wales and Northern Ireland. Bureaux provide advice from over 3,300 outlets, including bureaux in the high street, community centres, health settings, courts and prisons. All CABx are registered charities.
The CAB service has twin aims: to ensure that individuals do not suffer through a lack of information about their rights; and equally to exercise a responsible influence on the development of policies and practices, both at a local and national level.
In 2006/07 bureaux in England and Wales advised around two million people with new or ongoing problems.
Employment is the third largest area of work for the Citizens Advice service. In 2006/07 and a total of 276,000 individuals received some form of employment advice from us – around the same as in the previous year.
Advice on pay and entitlements, dismissal and terms and conditions together comprise about half of employment issues. Advice about dispute resolution and employment tribunals increased significantly during 2006/07 (35% and 23% respectively).
Key points:
- Citizens Advice welcomes this Bill and supports the proposed changes to both the dispute resolution procedures and the enforcement of the National Minimum Wage.
- However, we regret that the Bill does not address a flaw in the current employment tribunal system which allows unscrupulous employers to avoid paying awards made against them with virtual impunity. We therefore welcome the relevant new clause (number 24, after Clause 7) proposed by Lord Wedderburn of Charlton and Baroness Turner of Camden.
General remarks
Citizens Advice welcomes and supports all the key provisions of this Bill. We believe that the provisions in clauses 1 to 7 will improve both access to and the effectiveness of the employment tribunal system. And we believe that the provisions in clauses 8 to 16 will significantly strengthen enforcement of both National Minimum Wage and employment agency legislation by the relevant statutory enforcement bodies. Citizens Advice is disappointed that Government has not taken the opportunity presented by this Bill to improve the system for the enforcement of unpaid employment tribunal awards.
The problem of non-payment by employers of Employment Tribunal awards
Citizens Advice believes it is essential that this Bill addresses the problem of rogue employers ignoring awards made against them by Employment Tribunals and the resulting difficulty and hardship this causes to the successful claimant. We therefore welcome the relevant new clause tabled by Lord Wedderburn of Charlton and Baroness Turner of Camden.
Who would benefit from improved enforcement of Employment Tribunal awards?
The individual who has had an award made in their favour would be the obvious beneficiary of a change which would allow them to be sure of receiving their award within a reasonable timeframe. But others stand to gain from such a change too.
Law abiding employers would benefit from a more level playing field and the knowledge that rogue employers, perhaps their competitors, would no longer be able to flout the law by ignoring their responsibilities.
The State would benefit as whenever an employment tribunal award goes unpaid the money spent by the State on dealing with and determining the tribunal claim effectively becomes wasted. The same applies when a COT3 settlement, brokered by Acas, goes unpaid. Measures to ease the enforcement of unpaid awards and settlements would considerably reduce this effective wastage of public funds.
The current Government would also benefit as improving the rate of payment of awards would represent a further step towards fulfilling their commitment to “ensure that the most vulnerable workers get [their] rights and are not mistreated” by the small minority of employers who “deliberately flout the law” (see page 8 of our December 2007 report Rooting out the rogues).
Discussion of the problem during the Second Reading debate
Responding at the end of the Second Reading debate the minister Lord Bach addressed the concerns that had been raised by a number of speakers about the problem of unpaid employment tribunal awards.
He said: ‘The noble Lord, Lord Razzall, my noble friend Lord Watson and others talked about a fair employment commission to enforce tribunal awards. There are new powers in the Tribunals Courts and Enforcement Act 2007 which streamline the process by which unpaid awards are enforced. They may be enforced in the same way as any county court judgment if unpaid after 42 days. I hope noble Lords will be patient. We want to assess the effectiveness of these measures before considering any potentially more burdensome methods for enforcing awards, but we know how strongly it is felt that some enforcement is necessary.’
In our briefing for the Second Reading debate Citizens Advice acknowledged and welcomed the changes Lord Bach referred to. However, we believe that these provisions do not go anywhere near far enough. For it is the common experience of CAB advisers that registration of an unpaid award in the County Court – which under the provisions of the 2007 Act is to become automatic and free of charge – frequently fails to secure payment as the associated consequences for the employer of continued non-compliance are negligible.
In short, the kind of rogue employer who isprepared to disregard a tribunal award is unlikely to be moved by the simple fact of registration in the County Court. They might well be moved by the arrival of the bailiffs, but arranging that is the difficult (not to mention costly and time-consuming) part of the process. In the words of one CAB adviser cited in our March 2005 report Hollow victories, "registering the unpaid award in the County Court is easy enough, but enforcement is almost impossible". In other words, the relevant provisions of the 2007 Act will, when implemented (see below), make automaticwhat is already "easy enough", but donothing to aid actual enforcement.
Furthermore, these provisions of the 2007 Act have not yet been implemented, and the Government has not yet given any indication of when they will be. A Ministry of Justice consultation document on implementation of Part 1 of the 2007 Act, published on 28 November 2007, simply states that “some detailed work remains to be done on this so that the new provisions work seamlessly between Acas, the tribunals, the county courts and enforcement agencies”.1 We suspect and fear that this work is no longer a priority for the Tribunals Service and Ministry of Justice.
Accordingly, for the time being successful tribunal claimants who have not received their award still need to pay to register the unpaid award in the Country Court before they can begin enforcement action, and those who have not received a COT3 settlement cannot enforce the settlement through the County Court (as the 2007 Act provides for).
A CAB in East Sussex advised a Portuguese client on a case they took to an Employment Tribunal. The tribunal awarded the client £3,115.24. Their former employer the ignored the judgment and the award was registered at the County Court. This was also ignored by the former employer and the client eventually gave up pursuing its enforcement as they did not wish to pay additional fees for enforcement procedures without any likelihood of payment being made. The client was angry and frustrated by what she saw as the failures of the system.
A CAB in Somerset assisted a client in taking his case for unfair dismissal to an Employment Tribunal. The client was awarded £4,545 but the employer was resisting payment despite having several companies still trading and solvent. The bureau assisted the client with a statutory demand which appeared to have no influence on the ex employer. The client was faced with having to enforce his award through the County Court with additional fee costs and was not guaranteed to receive any money via this process which in itself would be lengthy. After the many months of preparing the tribunal and the hearing he faced another long wait without any certainty that he would ever receive the money due to him. The adviser noted that the client felt badly let down by the system and felt that tribunal awards are not worth paper that they are written on.
The extent of the problem: enough to warrant further action
Some argue that the number of unpaid awards is relatively small and does not justify the expenditure of public funds required to improve the rate of enforcement. In strictly numerical terms, the number of unpaid awards (and COT3 settlements) may well be small. We say ‘may well be small’ because, of course, there are no official figures (see also below). However, the survey of CAB advisers we conducted for our March 2005 report Hollow victories suggested that, each year, the 430 Citizens Advice Bureaux in England and Wales alone deal with some 650 unpaid employment tribunal awards, which is one in 20 of the some 13,000 awards made by the tribunals each year. Accordingly, it seems reasonable to conclude that the total number of unpaid awards is in the region of 1,000 per year – or one in 13 of all awards.
Citizens Advice believes that this is a significant proportion of all tribunal awards, and we would suggest that such a degree of non-compliance seriously undermines the credibility of both the employment tribunal system as a whole, and the very welcome reforms of that system set out in the current Employment Bill. Furthermore, we would suggest that such non-compliance tends to impact disproportionately on the lowest paid and most vulnerable workers, who are over represented in the caseload of Citizens Advice Bureaux and who are, increasingly, a main focus of the Government’s wider policy on employment relations (see page 8 of our December 2007 report Rooting out the rogues).
Indeed, however ‘small’ the total number of unpaid awards (and COT3 settlements), the impact on individual claimants is substantial, and can be devastating. One CAB client, interviewed as part of a research project funded by the Department for Business, Enterprise and Regulatory Reform in late 2007, and who had not received any of the COT3 settlement of her tribunal claim for pregnancy-related unfair dismissal from her job as a sheet metal worker, described the impact on her and her family as “horrendous, no money and pregnant, very hurt and upset after seven years employment, problems at home, and financial difficulties”.2
Furthermore, if the total number of unpaid awards is indeed in the region of 1,000 per year, then we would suggest that the cost to the Government of enforcing these awards would not be significant – and could in any case be covered, at least in part, by adding the costs involved to the amount recovered from the employers in question. We also believe that the mere existence of State-led, rather than claimant-led, enforcement would improve employer compliance in the first place and so reduce the number of cases in which actual enforcement action would be required. For some rogue employers, at least, would calculate that, unlike many individual claimants now, the State would not easily give up on enforcing an unpaid award. And the greater the financial disincentives to late payment, through the addition and recovery of enforcement costs and perhaps also the imposition of financial penalties, the greater this ‘self-regulation effect’ would be.
It is disappointing that, to date, the Government has not undertaken any research to establish the true extent of such non-payment of tribunal awards and COT3 settlements. We understand that the Ministry of Justice has, for some time, had plans to conduct some research by following up a sample of successful tribunal claimants. However, these plans appear to have become stalled. We are aware that the Acas helpline receives a significant number of calls about non-payment of tribunal awards and COT3 settlements, and it would be a relatively easy matter to conduct a monitoring exercise in relation to such calls.
1. Paragraph 106 of Transforming Tribunals, Consultation Paper CP 30/07, Ministry of Justice.
2. See Chapter 3 of Vulnerable workers: preliminary findings from the Citizens Advice client research, Employment Relations Occasional Paper, BERR, January 2008, downloadable at: http://www.berr.gov.uk/employment/research-evaluation/errs/page43839.html
Public Affairs contact: Bethan Collins Parliamentary
Social Policy contact: Richard Dunstan Richard Dunstan
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