Heggie v Uniroyal Englebert Tyres Ltd 1998 IRLR 425 (EAT)
This case attempts to clarify the approach to unfair dismissal compensation and in what order the percentage reductions for contributory conduct and employer's payments are deducted when calculating the compensatory award. This can have an enormous impact on the level of damages awarded.
The relevant legislation is section 123 of Employment Rights Act 1996.
Mr Heggie was dismissed by his employers because of his level of absences. The Employment Tribunal found that in view of the level of Mr Heggie's absences, dismissal was not a sanction within the band of reasonable responses.
The Employment Appeal Tribunal accepted that the tribunal had applied the correct test and concluded their decision that Mr Heggie had been unfairly dismissed was also correct. The original tribunal, in assessing the level of compensation, decided that the percentage reduction for contributory conduct from the initial compensation figure should be made before the employers were given credit for payments made by them in relation to wages in lieu of notice.
Mr Heggie appealed against the decision. The order in which these deductions were made greatly reduced the final compensation figure. The EAT had to consider the case law which had developed on the subject.
This begins with the cases of UBAF Bank Limited v Davies 1978 IRLR 442 and Parker and Far Limited v Shelvey 1979 IRLR 434 which held that any reduction for contributory conduct should me made after the deduction of any excess payment made by the employers. This approval is more favourable to employees, as it means the reduction is made to the net figure.
However in the case of Clement-Clark International Limited v Manley 1979 ICR 74 the EAT took the alternative view that the order for deduction should be that any percentage deduction for contributory conduct should be made before the deduction of any excess payment made by the employers.
The subsequent cases of Derwent Coach Works v Kirby [1994] and Digital Equipment [1998] IRLR 134 (Court of Appeal - LELR issue 19) eventually came down in favour of the employer's interpretation in Clement-Clark.
The Heggie case gave the EAT the opportunity of reviewing all this confusing case law. It came to the conclusion that a reduction for inadequate consultation, or for contributory conduct should be made before any reduction in relation to any payments made by the employer. The EAT justified taking this line on the basis of the overriding consideration of justice and equity set out in section 123(1).
The EAT rejected the approach of Morrison J in Digital that the calculation should be carried out as in loss of earning cases with a percentage deduction only being made after the deduction of any excess payment.
The EAT accepted that to adopt the reasoning of Morrison J would mean that the employers were not getting full credit for the payment they made. They argued it was illogical that the employer who made payments should lose part of the benefit of such payments to the extent that the employee's conduct contributed to the dismissal.
Whilst it is difficult to argue with the view that the employer should obtain full credit for payments he makes, it does appear that by placing the reduction for contributory conduct before giving credit for such payments, the employer will be receiving proportionately higher credit for any payments he makes, and is arguably receiving more than full credit for such payments.
The employee's compensation will often be completely wiped out. Viewed from that perspective it is difficult to see how this approach meets the requirement of justice and equity in section 123(1).
Consideration of the order of deduction in contributory conduct cases by the Court of Appeal would hopefully bring an element of certainty to this whole area.