All too often, an award of compensation by an employment tribunal can end up as a hollow victory for workers. The reason is simple. Awards are not being paid because employment tribunals in England and Wales have no powers to enforce them.

According to a recent report by the Citizens Advice Bureaux (LELR 94), there were 13,000 successful tribunal claims in 2003-4, most involving unfair dismissal, unpaid wages and redundancy pay. The vast majority resulted in a financial award by the tribunal.

The bureaux also reported a steady stream of cases of nonpayment of those awards by employers. Some were unpaid as a result of insolvency, but far too many were the result of sheer intransigency on the part of the employer who perhaps thought it would go away.

In this article, a solicitor from Thompsons' Employment Rights Unit in Cardiff, looks at what claimants can do if their employer refuses to cough up, or becomes insolvent.

What should claimants fo first?

The best bet for enforcing a tribunal judgment is to lodge a claim in the county court. This requires filling in the relevant application form (N322A available from www.courtservice.gov.uk).

The application must be made in the court in the area where the employer (known as the respondent) either lives or carries on his or her business. There are about 230 county courts in England and Wales, each covering a specific geographic jurisdiction.

When 'filing' (or lodging) the application form, a copy of the tribunal judgment must be attached to it. The form is only one page and is fairly easy to complete. The claimant just needs to provide all their details, plus everything it asks about the respondent. The claimant also has to pay a fee, which is currently £30.

Once the form has been processed by an officer of the court, it then issues an order to the employer to pay the award, plus interest and the court fee within 14 days. Costs incurred for solicitors' fees up to a maximum of £75.50 for awards exceeding £2,000 can be claimed back.

What about getting a County Court Judgment?

Once the claim has been filed, the court will enter the employer's name on the register of county court judgments. This may make a small employer pay up, as this is the register that banks, building societies and credit companies search when considering applications for financial loans and credit.

However, it may not have much impact on limited companies and there is, therefore, no guarantee that a claimant will receive any money as a result of an employer's name going on the register.

 

How does the Court enforce its judgment?

There are a number of ways to enforce a county court judgment, depending on individual circumstances.

The alternatives include:

  • issuing a warrant of execution - in other words, sending in the bailiffs to seize some of the employer's assets which they can sell off to pay the debt
    issuing a third party debt order - getting money from a third party who either owes the employer money or holds it on his or her behalf such as a bank
    issuing a charging order - this secures payment of the money owing against land or other property owned by the employer, and it prevents the employer from selling it without paying the claimant first; a sale can be forced, but advice from a solicitor should be sought first.

It is important to consider the size and solvency of the respondent when choosing the method of enforcement. It is often a good idea to do a Companies House check to assess whether the company's finances are in order and whether annual accounts have been filed and are up to date.

What happens if the employer is insolvent?

If the employer has ceased trading, the claimant can apply to the courts to have a receiver or liquidator appointed and declare them insolvent. If the employer was a sole trader,then a statutory demand can be served. Twenty one days after serving it, the claimant can apply for a bankruptcy order against the employer. However, these options only apply if the clainant is owed more than £750.

Assuming there are any assets left, these will then be sold to pay off the employer's debts. However, the claimant may not get all their money back as these have to be paid off in a certain, very strict order. If there are no assets left, the claimant can apply to the DTI's National Insurance Fund.

What about redundancy?

If the employer becomes insolvent and the employee is owed a redundancy payment, application can be made to the Department of Trade and Industry. It has produced a very helpful guide (Redundancy and Insolvency - A Guide to Employees) and all the necessary forms can be accessed from the same source (www.insolvency.gov.uk).

A claim as a result of a tribunal decision should include a copy of it along with the relevant form (RP1). There is, however, a limit on what can be claimed under this scheme, with the result that only part of an outstanding debt may be met. If the respondent still owes money, the claimant should contact the insolvency practitioner dealing with the case and alert them to this fact.

What about cases conciliated by ACAS?

These cannot be registered in the county court, so the claimant will have to go to the High Court and allege breach of contract. The trouble is that this can be contested by the employer, which means that he or she can re-open the very issue decided by the tribunal. This inevitably involves more time and expense.

What is the conclusion?

Clearly the enforcement system is unsatisfactory. The government has, however, done little to date to resolve the situation although it did produce a white paper last year indicating an intention to reform current 'processes'.

Unfortunately, as the Citizens Advice Bureaux pointed out in their report, the government's proposal to elevate the status of tribunals (so that an award would have the same status as an order of any civil court) does not go far enough. Instead, it recommends that unpaid awards should be enforced directly by the state. This idea looks a long way ahead of its time.

NB: Please see correction to this item in LELR 100.