Compensation for unfair dismissal is calculated according to the loss to the employee of their salary and benefits. In Fox v British Airways, the Employment Appeal Tribunal (EAT) held that the estate of an employee who had been dismissed (and died shortly afterwards) could bring a claim for loss of a death in service benefit as it represented a real loss of substance to the deceased.

Basic facts

Mr Fox, who was 44, had been off sick for some time with a back condition. He had surgery five days after being dismissed by BA for incapability which, it had been hoped, would make him fit enough to work again, but he died three weeks later.

Had he still been in work when he died, he would have been entitled contractually to a death in service benefit of three times his annual salary (over £85,000), but because he was dismissed he received nothing.

Mr Fox’s father brought a claim on his son’s behalf for unfair dismissal and disability discrimination.

Relevant law

Section 123 of the Employment Rights Act 1996 states that the compensatory award for unfair dismissal should be “just and equitable in all the circumstances having regard to the loss sustained by the Claimant in consequence to the dismissal insofar as that loss is attributable to action taken by the employer.”

Tribunal decision

The employment judge said that, although the dismissal was unfair, he could not award compensation for the death in service benefit, as it involved a loss to the estate and not a loss to Mr Fox as required by section 123.

The real loss suffered by Mr Fox, said the judge, was the benefit of the life insurance cover, not the death in service payment. The beneficiaries were only entitled, therefore, to recover a nominal sum “comparable to the sum awarded for the loss of statutory rights”, in this case a total of £350.

Mr Fox’s father appealed against the decision not to award the full sum.

EAT decision The EAT held that Mr Fox was entitled to the death in service benefit for as long as he remained a BA employee. Once he was dismissed, however, he lost that contractual right, since he was no longer in service.

“There was thus a loss, which was his loss, of the entitlement to have a sum paid to others on his death. There can be no doubt that that is a real benefit: he contracted for it as such”. That being so, “any idea that there is simply no loss here because the deceased will by definition not be alive to enjoy it ... must be rejected”.

In terms of assessing the value of the loss, the EAT said that any compensation payable should put the party who had incurred the loss in the same position as though they had not sustained it. Although that would usually be the cost to the claimant of the insurance premium, this case were different.

Given the very unusual circumstances, the EAT agreed with Mr Fox’s father that the sum required to put his son into the position in which he would have been had the principle of full compensation been applied, was the sum payable on death - £85,000.