Elkouil v Coney Island Ltd [2002] IRLR 174

The Employment Tribunal, in an important decision, have clarified what compensation should be awarded in redundancy dismissal cases. Section 123 (1) of the Employment Rights Act 1996 states that when considering the amount of a compensatory award it '...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.'

Readers will be familiar with the 'Polkey reduction' in Tribunal awards (where an award is reduced if it is considered that had the employer taken the appropriate steps it would not have affected the outcome). In redundancy dismissal cases such as Mining Supplies (Longwall Ltd v Baker [1988] IRLR 417 and Abbotts v Wesson-Glynwed Steels Ltd. [1982] IRLR 51 EAT, the Tribunals generally awarded two weeks compensation on the basis that had the employers acted properly the employee would have had a further two weeks employment.

The EAT in Elkouil v Coney Island Ltd have revisited these decisions when considering the particular facts of the case.

Mr Elkouil was employed as a credit controller. New systems were introduced between May 1998 and July 1999 and Mr Elkouil was made redundant with immediate effect on 27 July 1999. A complaint was lodged at the Employment Tribunal claiming unfair dismissal on the grounds of lack of consultation. Following the earlier decisions, the Tribunal considered that consultation would have taken no more than two weeks and therefore made a compensatory award of two weeks pay.

Mr Elkouil appealed on two grounds: 

  1.  The tribunal had erred in failing to find that the dismissal was unfair because not only had there been a lack of consultation but also a lack of warning. 
  2.  The amount of compensation awarded was inappropriate in the circumstances because the employers knew at least ten weeks in advance that he was at risk of being made redundant.

The first ground of appeal failed. The EAT held that there was not a separate duty on the employer to warn an employee of impending redundancy. Consultation and warning are part of the same process which should commence with a warning that the employee is at risk.

Even though the first ground of appeal failed the EAT upheld the second. They considered that where a Tribunal finds that an employee was unfairly dismissed for redundancy on the grounds of lack of consultation, the appropriate method of calculating compensation was by reference to what would have been the likely outcome if they had done what they should have.

In upholding Mr Elkouil's appeal the EAT considered that the Tribunal should not have constrained itself to assessing compensation on the basis of how long the consultation process would have taken and making an assumption that the employee would have been employed for that period. Instead, where, as in Mr Elkouil's case, the employers knew some ten weeks before he was dismissed that he was going to be made redundant the appropriate measure of compensation was ten weeks.

This decision provides a wake up call to unscrupulous employers who spring redundancies on workers at the last minute. It is only fair that employees are properly compensated when employers fail to warn them that their job is at risk.