In this short update, we look at an unusual but important case on remedies and the application of the statutory cap, which made its way to the Employment Appeal Tribunal (EAT) on not one but two occasions and resulted, on one view, in a particularly harsh outcome for the losing employer.
The employee was found by the Employment Tribunal (ET) to have been unfairly dismissed. She sought re-engagement under section 115 of the Employment Rights Act 1996. In other words, to get a comparable or appropriate job back with her previous employer (or an associated or successor employer) on terms decided by the ET which can include, for example, loss of benefits or arrears of pay in the interim period.
As an aside, orders for re-engagement (or re-instatement) are the exception rather than the rule and awarded in less than 1% of cases. That said, this case demonstrates the potential implications of an appeal against a refusal to make an order of re-engagement or re-instatement.
The ET refused her application for re-engagement but awarded compensation of £46,153.55.
The employer duly paid the full £46,153.55.
The employee successfully appealed against the decision to refuse re-engagement and the case was sent back to the ET to look at the issue of remedy once again.
At the second remedies hearing, the ET once again refused to award re-engagement but also went on to find that the first award of compensation (the £46,153.55) was deficient and instead awarded £128,961.59.
Main issue before the ET on compensation
At the time of this case, the cap on compensation for unfair dismissal was £74,200 (it is now the lower of £93,878 or 52 weeks’ pay).
The issue for the ET was when the cap was to be applied and what to do with the fact the employer had paid £46,153.55 already.
Option A: the employee argued that the £46,153.55 should be deducted from the new award of £128,961.59 (giving £82,808.04) and the statutory cap of £74,200 applied. In other words, irrespective of the £46,153.55 already paid, the employer should now pay a further £74,200.
Option B: the employer argued the reverse and that the words of the statute required “account” to be taken of the amount paid and if option A was followed, the employer would receive no credit for having paid out the first award of £46,153.55. Otherwise, the £46,153.55 would effectively make no dent in the £74,200 statutory cap and the employer would be left having to pay the full capped amount of £74,200 plus the amount already paid of £46,153.55. The employer wanted the statutory cap to be applied first and then credit given for the amount already paid, leaving a balance due of £28,046.45.
Despite having “great sympathy” with the position of the employer, the EAT held that option A was correct. The ET was required to award a sum that was “just and equitable” and the EAT recognised that what is just and equitable in any given case turns on a variety of factors. In this case it had regard to the employee’s argument that what was just and equitable was for the employee to receive as much of her awarded losses (£128,961.59) as was competent for the ET to do so.
The full judgment can be found here.
As the EAT in this case surmised, the employer, faced with an appeal on the issue of re-engagement, likely did not foresee the ET revisiting the question of compensation and if it had, would likely not have paid the £46,153.55 at the time it did.
Employers on the wrong end of an ET decision need to carefully consider the scope for appeals, the timing of those and possible outcomes and take advice on appropriate steps to avoid being in the unfortunate position of the employer in this case.
Generally speaking, a party must pay an award with 14 days of the judgment or order to do so but there are exceptions, full consideration of which fall outwith the scope of this article, but include for example where there is a sist or stay of the proceedings or judgment.