Dunnachie v Kingston upon Hull City Council
Williams v Southampton Institute
Dawson v Stonham Housing Association Ltd [2003] IRLR 385

Can employment tribunals make financial awards to compensate employees for non-economic losses such as injury to feelings in unfair dismissal claims? This is the £53,500 question (it cannot be the million dollar question as tribunals can only award up to £53,500 in compensatory award for ordinary unfair dismissal cases).

In the House of Lords' judgment in Johnson v Unisys [2001] IRLR 279 (see LELR 60, July 2001), there was a reference to possible compensation for dismissed employees in unfair dismissal claims for non-financial losses caused by the dismissal. This would cover such things as injury to feelings in the manner of dismissal and psychological damage, in appropriate cases. There was uncertainty about the legal status of the comments in the Lords'd5 judgment as the case was brought, not as an unfair dismissal claim, but as a breach of contract. In essence the Lords held that compensation for the manner of dismissal was not available for breach of contract but referred to its availability in unfair dismissal cases.

Since then, practice has varied from tribunal to tribunal as to whether to award this form of compensation in unfair dismissal claims, relying on the Johnson v Unisys judgment. It was only a matter of time before the issue was appealed and in these three conjoined cases the Employment Appeal Tribunal has considered the issue. Unfortunately for applicants and their advisors, the EAT has come down against employment tribunals awarding compensation for non-economic loss.

The House of Lords, in Johnson v Unisys, held that, since the statute allows tribunals to award amounts, 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" (Section 123 Employment Rights Act 1996). There was "no reason why in an appropriate case it should not include compensation for distress, humiliation, damage to reputation in the community or to family life". On the face of it, it would seem an uncontroversial proposition and very much in line with the way in which a tribunal approaches loss calculation in discrimination cases. Courts and tribunals spend a lot of time putting a figure on that which cannot easily be calculated in monetary terms.

But that would be to reckon without case law and the power of precedent. A 1972 case (Norton Tool Co Ltd v Tewson [1972] IRLR 86), before the National Industrial Relations Court (which predated the Employment Tribunal) held that "loss" in the context of unfair dismissal means economic loss. Since the Norton Tool case was neither referred to, nor directly overruled by the Lords in Johnson v Unisys, it could not be said to have been overturned and therefore was still binding.

The Dunnachie case is likely to be appealed, perhaps as far as the Lords if necessary, for a ruling which acknowledges that the task of Tribunals under their statutory powers in unfair dismissal cases is to assess and calculate compensation whether the loss is in pure arithmetical form or otherwise.