Redundancy Payments

Section 7 of the Employment Act 2008 raises the stakes in Unauthorised Deductions from Wages and Non-Payment of Redundancy Pay cases.

At present, if an employer makes an unauthorised deduction or fails to pay redundancy pay and loses at Tribunal (absent any question of uplifts or reductions under the dispute resolution procedures), the employee is only entitled to be awarded the deducted pay or non paid redundancy pay, even if the failure to pay has caused him consequential losses, for example bank charges.

Section 7 (which comes in to force for complaints presented on or after 6 April 2009) increases the Tribunal’s powers by enabling it to award consequential losses. Bank charges are the obvious example here and due to their amount are unlikely to cause most employers too much loss of sleep, but could the Tribunal go further? What if a failure to pay redundancy pay caused an employee to lose their home either because they could not pay the rent and were therefore served notice under the terms of their Assured Shorthold Tenancy Agreement or because they missed 2 or more mortgage repayments and the mortgagee (bank or building society) sought to repossess the property?

We will have to wait and see how far Tribunals will go with consequential losses. The Act gives them a wide descretion by use of the words “such amount as the tribunal considers appropriate in all the circumstances to compensate the worker for any financial loss sustained by him which is attributable to the matter complained of”.

This and more will be covered in more detail at our Annual Employment Law Update Seminar later this month (29 January 2009).