Rae v Balmoral Group (Times, 25.1.00)
Khanum v IBC Vehicles (EAT/685/98, 8.2.99: IRLB Jan 2000
Dench v Flynn and Partners [1998] IRLR 653
Camdecca Resources v Bishop (EAT/1083/98, 24.6.99: IRLB Jan 2000 p.11)
Taylor v John Webster Civil Engineering [1999] ICR 561
As reported in Issue 43 of LELR, the compensatory award for unfair dismissals has gone up from £12,000 to £50,000 for dismissals which took place on or after 25th October 1999. This article reviews the recent case law and legal principles used in calculating the compensatory award. The theme of recent cases is to highlight the tribunal's discretion to look at the award in the round, to assess what it is just and equitable to award, and not to be side tracked by technical arguments about causation or the burden of proof.
First work out what the applicant would have earned from their employer if he or she had not been dismissed. Employers often argue that bonuses, commissions and the like should be ignored because they are discretionary. That misses the point, which is what, in practice, the applicant would have got. The best guide to that is what the remaining workforce received, or what the employee tended to receive in the past. Tribunals are entitled to take a broad brush approach, as notably demonstrated in Leonard v Strathclyde Buses [1998] IRLR 693 (see Issue 38 of LELR), where a tribunal awarded the loss in share value which the applicants had suffered when the shares they were forced to sell back on dismissal tripled in price in the subsequent months. The Court of Session held that the tribunal was entitled to do so: its function was to assess what was just and equitable, and not to introduce technical legal concepts like foreseeability or remoteness of loss.
The same approach underlies and has been confirmed in the recent case of Rae v Balmoral Group. An employee had an altercation with a colleague. He refused to go back on shift out of fear; he was dismissed. After his dismissal he was signed off sick with stress, and the employer argued it should not have to pay compensation for that period. After all, it did not pay sick pay so the employee would have got no money even if he had not been sacked. The tribunal rejected this argument, finding that it was impossible to say what would have happened if he had not been sacked. The employer appealed, arguing it was for the employee to prove his loss. The EAT disagreed: it was quite legitimate for the tribunal to give the employee the benefit of the doubt, and a very broad test should be applied to issues of causation.
The next step is to give credit for the employee's earnings elsewhere since dismissal.
Where dismissal was summary, the notice period needs to be considered separately. In unfair dismissal cases there is normally no need to give credit for sums earned elsewhere during the notice period, on the basis that good industrial practice usually favours a lump sum of payment in lieu of notice up front (Norton Tool v Tewson [1972] IRLR 86). The same may also apply even in wrongful dismissal cases where there is a contractual provision entitling the employer to dismiss summarily with pay in lieu of notice: in Cerberus Software v Rowley [1999] IRLR 690 (see Issue 38 of LELR) the EAT held that the employee can claim the full notice pay as monies due under the contract.
It is in any case as well to claim wrongful dismissal or breach of contract as well as unfair dismissal in the IT1 in cases of summary dismissal; the employee may be entitled to notice pay even if the dismissal was fair, and any award is "ring-fenced" from deductions for contributory fault.
The applicant may be out of work, or earning less than before the dismissal. Tribunals often limit continuing future loss with a "cut off" point at three or six months or at most a year from the hearing date, but in reality it may take a lot longer to achieve previous earnings. With the higher "cap", it makes sense to devote some effort to finding evidence to support a longer period of future loss - such as a letter from the new employer about prospects for promotion and pay increases, or evidence about the state of the local employment market for someone in the applicant's position. Try the job centre for information.
Sometimes an employer argues that the employee's actions have "broken the chain of causation" so that it is not responsible even for ongoing losses that an employee can prove. For instance, the employee may have chosen to retrain for another career rather than seeking a job in the same field; or he or she may have taken another permanent job that came to a premature end. Again, the cases show that a flexible approach is required.
In Khanum v IBC Vehicles an apprentice technician in the motor industry was dismissed, and thereafter blacklisted so she could not find work. She started to study full time towards a computer systems engineering degree. The tribunal found that she had in reality little choice but to take up a degree course and that it was a sensible decision for her to take, but the chain of causation was broken and so it would not be right to award compensation beyond that time. The EAT disagreed. The proper question was whether the decision to attend university was a direct result of the dismissal. In the light of the tribunal's findings, it had erred in not making an award of future loss. The EAT stressed the special factors in the case, notably the blacklisting by an employer who held a dominant market position in a specialised field.
In Dench v Flynn and Partners a solicitor felt obliged to take a job at another firm after her dismissal, subject to a probationary period and against the advice of one her former bosses. She was dismissed at the end of a three month probationary period. The tribunal took the view that the new permanent job (although subject to "the usual" probationary period) automatically broke the chain of causation from the original dismissal. The Court of Appeal disagreed and sent the case back to the tribunal to reconsider. Each case had to be considered on its own facts.
In addition to awarding net loss of earnings, the statute allows tribunals to award expenses incurred in looking for work. In Camdecca Resources v Bishop the EAT confirmed that the tribunal was also entitled to include an award to reflect the time and effort the employee had put in to finding alternative work thus mitigating his loss. In this case the EAT awarded £500 under this head. The case reinforces tribunals' powers to compensate roundly for all loss flowing from a dismissal on a "just and equitable" basis, even those not precisely measurable in money terms (just as in the common case where a sum of £250 or thereabouts is awarded for loss of statutory rights).
Taylor v John Webster Civil Engineering is a useful reminder that Polkey reductions affect the compensatory award only. They should not be taken off the basic award or any redundancy payment; nor should they go to reduce any sum awarded in respect of the notice period. This is because, whether or not the employee would have been dismissed under a fair procedure, he or she was entitled to receive full pay throughout the notice period. It is also always worth remembering the case of King v Eaton (No. 2) [1998] IRLR 686 (see Issue 30 of LELR), which held that where it is too speculative for a tribunal to work out the percentage chance of an applicant keeping his job if a fair redundancy procedure had been followed, no percentage deduction need be made.