Complaints of unfair dismissal and unauthorised deductions from wages are among the most popular claims made by claimants in the employment tribunal. It is pretty well known that if a claimant wins a complaint of unfair dismissal they will normally receive some measure of compensation (the basic and the compensatory awards) and if they win their unauthorised deduction of wages claim then those deductions will be ordered to repaid.
A little less well known is the rule that that compensation/award may be increased by up to 25% if an employer does not comply with a relevant provision of an ACAS Code of Practice during the course of employment when relevant to the facts of a claim.
For example, if you’ve not been paid and raise a grievance about that but that grievance is ignored, the tribunal could award the unpaid wages be paid AND also order an addition 25% because the employer did not follow the ACAS Code (which says an employer should hear grievances). There is a catch are two catches, however. If you haven’t followed the ACAS Code (perhaps you didn’t submit a grievance about the non-payment of wages) then your award could even be reduced by up to 25%! Secondly, the relevant legislation which is found at section 207A of the Trade Union and Labour Relations (Consolidated) Act 1992, does nothing more than grant an employment judge discretion to make an award. What that means is the judge has the power to increase the award, but that’s it – there is no duty to do so. An employer could breach each and every paragraph of the ACAS Code in its dealings with an employee, pound the Code into a Papier-mâché pulp, and then refashion it into a mould of a hand showing a one fingered salute and there would be no obligation on the employment judge to increase the award.
There is however – in a non-Blairite way* – a third way that an employee can obtain additional awards in their unfair dismissal and unlawful deduction of wages claims and that comes in the application of Section 38 of the Employment Act 2002. It is a provision that is not well-known but is a very important provision for any employee (and just employees) pursuing a employment tribunal claim. In the remainder of this post I set out some key features of this provision and why, when it does apply, it can used effectively by claimants and their representatives.
A Remedy for a Particular Failing
Initial Particulars – When a person starts employment section one of the Employment Rights Act 1996 imposes an obligation upon the employer to supply the employee with a statement of initial particulars of employment, it is not a contract of employment but is a document where the employer sets out the main terms of employment to the employee (salary, notice, hours of work, etc). The full details of what must be included in, or be signposted to the employee are set out in section 1(4) of the Employment Rights Act 1996.
The Employment Rights Act requires that this statement be given no later than two months after the employment begins, even if the employment does not last that long. If the employer has given this statement and the particulars have not changed (see below) and these particulars satisfy each of the statutory conditions then that is the end of the matter an the ‘third-way’ will not be an option for an employee pursuing an employment tribunal claim (you can stop reading now). In fact, in a strange quirk – the rationality of which escapes me – even if employer issues a statement way beyond the deadline in the legislation but before a ET claim is made (for example, after a dismissal but during ACAS early conciliation) you can also stop reading even though the employer wholly failed to adhere to the legal obligation (for this strange quirk we have Parliamentary drafters and the EAT decision in Govdata Ltd v Denton (2019) to thank).
Amended Particulars –
Similarly, if there is a change in an employee’s terms of employment during the course of their employment section 4 of the Employment Rights Act 1996 compels the employer to provide a formal statement of those changes no later than one month after those changes (a failure to do so (a right that attaches to the section one right as well) can be subject to a separate ground of challenge by way of the reference procedure at section 11 of the Employment Rights Act 1996) but that attracts no compensation. Although not expressly determined by the Govdata Ltd case, it seem very likely the ‘get out of jail free’ loophole for employers who can avoid liability under section 38 of the Employment Act 2002 by giving a statement at any time before litigation starts would apply for this failure too.
An (Almost) Sure Thing
The effect of the above is that if you are a claimant and your employer (or former employer) did not comply with either of its duty to provide either a section 1 or section 4 statement, and the claim is one of the specified claims to which section 38 of the Employment Act 2002 applies (on which, see below), then you are potentially in line for a substantial increase in compensation if you go on to win your case.
The reason for this the unusual wording in section 38(2) and 38(3) of the Employment Act 2002 that states that where the failure and and qualifying conditions are met a tribunal “must” award two weeks pay and can award four weeks pay if it thinks it right to do so. This “must” is a striking contrast to the ACAS uplift provision that only says where there is a breach a tribunal “may” increase the compensation.
It is true that section 38(5) of the Employment Act does provide a clause that a Tribunal does not need to give this award if there are “exceptional” grounds why it is not just and equitable. I struggle to think of many circumstances were that high threshold will be met but as an indication if a company founder and director were also an employee and the company was taken over resulting in dismissal which was challenged, then since the employee was also sole owner and controlling mind of company at time of the failure that would seem to me to justify the non-award of a s.38 award.
A Recent Example
The power to make an award can make a huge difference to the financial value of a claim. The recent case of Brown v M Bryan Groundworks Ltd (2020) is a good example of this. The claimant alleged that the employer made unauthorised deductions from wages and the tribunal agreed. The actual value of the unauthorised deductions was fairly modest, amounting to £120.57. Many claimants who are not aware of the power under section 38 Employment Act 2002 would make that their sole claim – they want an order to compel the employer to pay them the missing £120.57.
However, because the employer had failed to provide employment particulars, and the employee was successful in a relevant claim section 38 of the Employment Act 2002 placed on obligation to make the additional award. On the facts, 4 weeks pay was awarded and so, a claim concerning £120.57 resulted in a final award of 2,272.57. This was broken down into £120.57 for actual financial loss and £2,152 for section 38 (over 94% of the total award coming from non-financial losses).
Requirement to Highlight Issue
While the legislation is drafted as being mandatory for a tribunal the EAT has found that if a tribunal fails to consider the award this is not an error in law (and so cannot be challenged) if a claimant does not raise the issue – Levy v 34 & Co Ltd (2021). The decision places emphasis on the lack of the issue being raised in the ET1 form which seems a harsh requirement but it is a point to be aware of for claimant’s, if it is clear or possible there is a possible section 38 application this should be raised in the ET1 whereever possible.
The Gateway Claims
So, what claims potentially attract the possibility of an additional section 38 award? The most prevalent ones, as summarised in the post above, are complaints of unfair dismissal and unauthorised deductions from wages. However, the full list, which is supplied at Schedule 5 of the Employment Act 2002 include any claim for:
- A claim that an employer made inducements relating to union membership or activities (section 145b of the Trade Union and Labour Relations (Consolidated) Act 1992); or
- A claim that an employer subjected a person to a detriment because of union membership or activities (section 146 of the Trade Union and Labour Relations (Consolidated) Act 1992); or
- A claim that an employer subjected a person to a detriment because seeking trade union recognisition with employer (Paragraph 156 of Schedule A1 of the Trade Union and Labour Relations (Consolidated) Act 1992); or
- A claim of unauthorised deductions of wages (section 23 of the Employment Rights Act 1996); or
- A claim for detriment arising from a employees status or activites (e.g., whistleblowing, Health and Safety complaint, making flexible working application, etc – section 48 of the Employment Rights Act 1996); or
- A complaint for unfair dismissal – both ordinary and automatic (section 111 of the Employment Rights Act 1996); or
- A complaint about amount of a redundancy payment (section 163 of the Employment Rights Act 1996); or
- A complaint about non-payment of the National Minimum Wage (section 24 of the National Minimum Wage Act 1998); or
- A complaint of breach of contract during employment (section 3 of the Employment Tribunal Extension of Jurisdiction (England and Wales) Order 1994); or
- A complaint for non-payment of holiday pay (Regulation 30 of the Working Time Regulations 1998); or
- A complaint of detriment as a member of a European Works Council /special Negotiating Body (Regulation 32 of the Transnational Information and Consultation of Employees Regulations 1999 / Regulation 45 of the European Public Limited-Liability Company Regulations 2004); or
- A complaint of detriment because of representative in Information and Consultation process (Regulation 33 of the Information and Consultation of Employees Regulations 2004); or
- Detriment because or representative role in pension consultation (Schedule to the Occupational and Personal Pension Schemes (Paragraph 8 of the Schedule in Consultation by Employers and Miscellaneous Amendment) Regulations 2006); or
- Detriment because of role as representative in Special Negotiating Body (Regulation 34 of the European Cooperative Society (Involvement of Employees) Regulations 2006); or
- A working time claim for a cross border worker (Regulation 17 of the Cross-Border Railways Services (Working Time) Regulations 2008); or
- A claim for discrimination at work (section 120 and 127 Equality Act 2010).
The Takeaway Point
If an employment tribunal claim is contemplated on any of above grounds then checks should be made whether there was a breach of an employees right to receive a statement of initial particulars of employment or statement of changes. If there is then that issue should be raised in the claim or as soon as possible thereafter to ensure that this issue will be part of the compensation / damages decision if that claim is successful.
* Although since the Employment Act was passed in 2002, I guess it was third way in a Blairite way after all.
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