Employees who win their unfair dismissal claim in a tribunal can ask to be awarded compensation. In Nicolson Highlandwear Ltd v Nicolson, the Employment Appeal Tribunal (EAT) said that employees who are found 100% responsible for their dismissal may find themselves not only being refused compensation, but also being ordered to pay for the other side’s costs for acting unreasonably.

Basic facts

Mr Nicolson and Mr Chalmers went into retail business together in 2002, with Mr Nicolson having the status of director until 2008 when Mr Chalmers expressed some concerns about the way the business was being run. At this point, Mr Nicolson became the manager of the shop.

In early October 2009 Mr Chalmers expressed further concerns about the business and on a visit to the shop, he discovered a dual invoicing system, invoices for customers not listed on the computer system and evidence of a separate business called Nicolson Kiltmakers being run from the premises.

He decided that Mr Nicolson had been acting fraudulently and dismissed him at a meeting on 28 October. Mr Nicolson brought an unfair dismissal claim.

Tribunal decision

The tribunal agreed that Mr Nicolson had been automatically unfairly dismissed because the company had not complied with the statutory dismissal procedures in force at the time.

However, it also decided not to award him any compensation as it said it would not be just and equitable in circumstances where “his conduct has contributed 100% to his own dismissal.”

The company then asked for an order requiring Mr Nicolson to pay its costs. However, the tribunal refused, stating that Mr Nicolson had not acted unreasonably in bringing a claim for automatically unfair dismissal. It said this was because unrepresented claimants should not be “discouraged from asserting their rights by costs orders, which are the exception rather than the rule" in tribunals; and that claimants are entitled to seek “simple findings of (unfair dismissal) without the objective of obtaining money”.

The company appealed to the EAT.

EAT decision

And the EAT agreed with the company, pointing out that the tribunal itself had found that Mr Nicolson was dismissed for conduct that amounted to fraud, based on overwhelming evidence. It had deemed him an unreliable witness who sometimes seemed unable to distinguish between fact and fiction and who still considered himself completely justified in what he had done.

It said that the tribunal was also wrong to justify his claim on the basis that he wanted a declaration that he had been unfairly dismissed. There is nothing to suggest that a “declaratory order” is a remedy that can be sought in an unfair dismissal claim, the only remedies being compensation, reinstatement or re-engagement and compensation.

The EAT concluded that “the decision that the Claimant did not act unreasonably was perverse. It was plainly wrong. It was reached on the basis of irrelevant considerations. It failed to take proper account of the context which was as I have set out above. The only conclusion open to the Employment Judge was that the Claimant acted unreasonably in bringing the claim at all and, having brought it, by persisting with it once he had it spelt out to him that the Respondent would be relying on fraud on his part and submitting that, on any view, he should receive no award of compensation”.

It made an order for expenses in the company's favour, which it said should be assessed by a differently constituted tribunal.


The EAT’s conclusions are unfortunate in that it did not consider the case of Telephone Information Services Ltd v Wilkinson, in which another EAT held that employees have the right to have their claim of unfair dismissal decided by a tribunal. It said that: "Such a claim is not simply for a monetary award; it is a claim that the dismissal was unfair. The employee is entitled to a finding on that matter and to maintain his claim to the Tribunal for that purpose.”

The decision of this EAT could, in Thompsons' view, curb access to justice. It also fails to recognise that a finding of unfair dismissal is highly relevant to claimants in practice. Employees should therefore make clear, when bringing an unfair dismissal claim, that they want a finding or admission of liability.