Consequence of dismissal

Brown v Mr and Mrs Baxter t/a Careham Hall

Employees are entitled to claim for compensation for damage done to their reputation in certain circumstances. The Employment Appeal Tribunal (EAT) has clarified in Brown v Mr and Mrs Baxter t/a Careham Hall that an award can only be made for loss sustained as a consequence of dismissal.

Basic facts

Ms Brown had worked as an assistant care manager in a residential care home for the elderly run by Mr and Mrs Baxter since November 1982.

On 25 May 2008 she gave her employers a month’s notice, but on 6 June Mr Baxter summarily dismissed her for gross misconduct following a complaint from a resident. Mr and Mrs Baxter also referred her to the authorities under the Protection of Vulnerable Adults (POVA) rules.

She claimed unfair and wrongful dismissal and compensation for the loss of her new job which, she alleged, was the result of an inaccurate reference and unfounded accusations that her former employers made about her to her new employer.

Tribunal decision

The tribunal agreed that her employers had failed to follow the statutory disciplinary procedures in force at the time and she had therefore been automatically unfairly dismissed.

However, it said it could not make an award of compensation for the loss of her new job as it was a result of the referral under the POVA rules and not “in consequence of her dismissal”, as required under section 123 of the 1996 Employment Rights Act (ERA).

Ms Brown said that the tribunal should have had regard to the decision of Chagger v Abbey National plc and anor, which entitled her to compensation for the damage done to her reputation as a result of her dismissal - that is, “stigma damages”.

Relevant law

Section 123 states that "... the amount of the compensatory award shall be such amount as the Tribunal considers just and equitable in all the circumstances having regard to the loss sustained by the complainant in consequence of the dismissal in so far as that loss is attributable to action taken by the employer.” EAT decision

However, the EAT did not agree with her and said the tribunal had been right to reject her argument for stigma damages.

It said Ms Brown could not rely on Chagger because her case was not actually about stigma damages. Instead it was all about “the loss which flowed from reports and referrals, which the employers were required to make and, as the Tribunal found, would have made in any event, even if the Claimant had not been dismissed”.

As section 123 ERA made clear that the compensatory award could only be awarded for loss sustained "in consequence of the dismissal" and the loss here was not a consequence of her dismissal, the EAT dismissed Ms Brown's appeal.