Breach of contract claims that are heard by tribunals are subject to a cap of £25,000. The Employment Appeal Tribunal (EAT) has held in Ugradar v Lancashire Care NHS Foundation Trust that where an employee brings a claim for both contractual and statutory redundancy payments, when the £25,000 cap applies, statutory redundancy is not included within the cap and statutory redundancy pay should be awarded in addition to the £25,000 maximum.
Thompsons was instructed by Unite the Union to act on behalf of its member.
Under paragraph 16 of the NHS “Agenda for Change” terms and conditions of employment, Ms Ugradar was entitled to an enhanced contractual redundancy payment which was substantially higher than that provided for under statute.
After her post was abolished in a re-organisation, she was offered various alternative roles which she could not accept. When her employment terminated, the Trust refused to award her a redundancy payment on the basis that she had unreasonably refused these offers of alternative employment. She lodged tribunal claims for a contractual payment (which exceeded the £25,000 cap) and brought a further claim for a statutory redundancy payment.
The tribunal agreed with Ms Ugradar that the employment she had been offered was unsuitable and therefore upheld her claim to a redundancy payment.
However, as the NHS scheme rules stated that her statutory entitlement had to be offset against any contractual payment, the tribunal ruled that it had to be subsumed within the contractual scheme. Under the Extension of Jurisdiction (England and Wales) Order 1994, the contractual payment had to be capped at £25,000.
The EAT held that there were two causes of action – one contractual and the other statutory. As such, Ms Ugradar was entitled to be paid a statutory redundancy payment in addition to the contractual payment. Although they overlapped, they constituted two separate claims.
With regard to the statutory claim, the EAT held that as Ms Ugradar met the conditions laid down in Part XI of the Employment Rights Act 1996 (ERA), the tribunal was under a duty to determine her complaint. Even if the contract had purported to restrict her rights to a statutory redundancy payment, it would have been void under specific provisions laid down in the ERA.
With regard to the contractual claim, the EAT rejected the notion that the conditions laid down in paragraph 16 of "Agenda for Change" intended to restrict the right to a statutory redundancy payment. Instead, it just stated that the statutory payment was to be offset against any contractual payment.
In this case, the contractual payment due was £43,949.04. The Trust was therefore entitled to set off any statutory redundancy payment made against that contractual liability. As Ms Ugradar was entitled to statutory redundancy payment of £5,868.00, the net amount of the contractual payment would be £38,071.04.
If it had not been for the cap on the tribunal’s jurisdiction she would have received these two payments. Given that there was a cap, the contractual payment had to be limited to £25,000. However, the cap did not apply to the statutory payment, which meant that Ms Ugradar was entitled to receive it as well.
Finally, the EAT noted that as the statutory cap had remained unchanged for a quarter of a century, it was “capable of producing real injustice” at its present level, particularly as the tribunal has the power to award greater sums in other claims. In order to bring her claim for a contractual redundancy payment, Ms Ugradar had to forego substantial parts of her contractual entitlement. If the statutory cap had been increased in line with inflation, she would not have suffered these losses.
This decision means that employees who opt to bring claims for contractual redundancy pay in the employment tribunal but are subject to the £25,000 cap on contractual awards can also tack on a claim for statutory redundancy pay and potentially be awarded a greater amount where it exceeds £25,000 as in this case. However, this is not wholly satisfactory, given that a tribunal is limited to awarding a maximum of £25,000 in breach of contract claims. As the EAT rightly pointed out, the cap is outdated and requires reform.