If an employer unfairly dismisses an employee without following a fair procedure , tribunals can reduce the claimant’s award of compensation (known as a Polkey award) if they think the employee would still have been dismissed. In Kapoor v Balfour Beatty Group Employment Ltd, the Employment Appeal Tribunal (EAT) held that, in a capability case, the tribunal could take the claimant’s conduct into account when deciding whether to make a Polkey reduction.

Basic facts

Following a restructuring exercise, Mr Kapoor (who had worked for Balfour Beatty for just over two years) was redeployed into another role. He did not perform well in the new job and was dismissed by letter a few months after his redeployment. He subsequently claimed unfair dismissal.

In its response to the claim, the company conceded that it had failed to follow the correct procedure but argued that he would have been dismissed in due course on grounds of capability and/or “some other substantial reason”. The company also argued that as Mr Kapoor had suffered no loss as a result of the procedural unfairness, he was not entitled to an award of compensation.

Tribunal decision

The tribunal found that there was an 85 per cent chance that Mr Kapoor would have been fairly dismissed if the company had followed its capability procedure no later than three months after the actual date of dismissal. In line with the decision in Polkey v AE Dayton Services Ltd, the tribunal reduced his compensation accordingly to reflect the fact he would still have been dismissed, known as a Polkey reduction.

The tribunal also refused to award compensation for a bonus on the ground that either his employment would have been fairly terminated before the bonus date; or because he would have been working out his notice.

Mr Kapoor appealed on the basis that the judge had paid undue attention to his conduct instead of considering what might have happened had the company applied the correct process for dealing with capability issues. In particular, he argued that any issues relating to his “conduct” had no place in a Polkey assessment where the dismissal had been unfair because of a failure to comply with a capability procedure. He also argued that had he received three months’ notice, he would have been entitled to receive the bonus.

EAT decision

The EAT rejected his argument however, holding instead that the tribunal had not erred by taking conduct into account in order to decide the likelihood of his performance improving and if he would have remained in employment when determining the Polkey reduction.

Having considered the proposition that the adoption of the capability process might have provided Mr Kapoor with a “wake up call” that would result in a radical change on his part, the judge identified that there was only a 15 per cent prospect that dismissal would not have occurred. She therefore reduced his compensation accordingly.

As for the bonus, the EAT held that the judge’s reasoning was correct and it dismissed the appeal.