Stricter rules for compensation payments
When calculating compensation, the tribunal can take into account all future financial losses. However, a new Court of Appeal ruling has laid down clear guidelines that appear to curb this power. What’s the latest?
Predicting the impossible
Where a discrimination-based dismissal occurs, the tribunal can, if it thinks an employee won’t find equivalent work, sanction a financial award for a career-long loss. As a result, calculations are often weighted against the losing employer. But following a recent case, the Court of Appeal seems determined to stop the scales of justice tipping so firmly in the employee’s favour. What happened and why is it good news?
Dismissed for bringing a claim
The case in question Wardle v Credit Agricole Corporate and Investment Bank 2011. It involved an employee, Wardle (W), who had applied for a promotion. In July 2008, the post he was after was given to a French national. Unhappy about this he claimed race discrimination based on nationality. On receipt of the tribunal papers, the Bank dismissed him. This led to him adding a further claim for unfair dismissal.
New job. In November 2008, he managed to secure a job with the Financial Services Authority. This was at a salary lower than he would have received had the Bank promoted him.
W won at tribunal. When it assessed his award, it felt that he had a “career-long financial loss of earnings”. This was then calculated from his date of dismissal in 2008, to his likely retirement date in 2024. However, it also found that there was an 80% chance of W leaving his job with the Bank in April 2010. So his compensatory award was reduced accordingly, i.e. he received 20% of his lost earnings for those 14 years.
Award deemed excessive
The Bank challenged the tribunal’s ruling. The parties eventually ended up in the Court of Appeal, which took a very different approach. It ruled that, although the tribunal can make career-long financial loss awards, the amount it awarded in this case was “excessive”. It concluded that W would have moved from the Bank by June 2011 anyway, so his attempt to claim any compensation beyond that point was denied.
What should happen now?
The Court went on to direct that career-long awards should only be given in “exceptional circumstances”; usually where there’s clear evidence that the employee has “no real prospect of obtaining another job”. It’s this bit that’s really helpful. In the vast majority of cases employees won’t be able to prove this, so it effectively ties the tribunal’s hands on when it can indulge them with a career-long financial award.
Note. Whilst this case is a win for employers, it doesn’t do away with stigma damages, i.e. compensation for the employee not being able to obtain a comparable position again due to them bringing a claim. Thankfully, however, these awards are rare.
Tip. If an employee files a claim against you, or threatens to do so, don’t dismiss them because of it. Even if you think that the relationship has broken down, the tribunal will come down hard if you do this.
The Court of Appeal has directed that career-long financial losses should only be awarded if three’s “no real prospect of the employee securing another job”. As this will be impossible to argue in the majority of cases, it effectively ties the tribunal’s hands. This makes discrimination-based claims less attractive.
Tips & Advice Personnel 23.06.2011