United Kingdom Employment Appeal Tribunal

APPEARANCES

 

For the Appellant	MS A RUSSELL (of Counsel) Instructed by: Messrs ASB Law Solicitors Stoneham House 17 Scarbrook Road Croydon Surrey CR0 1SQ
For the Respondent	MR J WYNNE (of Counsel) Instructed by: Messrs Rowley Ashworth Solicitors 247 The Broadway Wimbledon London SW19 1SE

SUMMARY

The principal holding (paras 13-35) is that a Tribunal is entitled, in accordance with good employment relations practice, to hold that an employee unfairly dismissed need not give credit for earnings achieved in new employment during a period when notice pay was made by the former employer. Norton Tool Co Ltd v Tewson [1972] IRLR 86 NIRC, affirmed in Babcock FATA Ltd v Addison [1987] IRLR173 CA applied. Hardy v Polk (Leeds) Ltd [2004] IRLR 420 EAT not followed. Case remitted in part for Tribunal to decide future pension loss, for it awarded 10 years when neither side claimed more than 5.


 


HIS HONOUR JUDGE McMULLEN QC

1. The main question which arises in this appeal is whether an employee, who has been unfairly dismissed and succeeds in obtaining paid work during a time when he has been paid money in lieu of notice by his previous employer, is required to credit his former employer with those earnings. Our answer to that question at paragraphs 13-33 is: no.

Introduction

2. The point arises in an appeal from a judgment of an Employment Tribunal sitting at London South, registered with Extended Reasons on 22 June 2004, Chairman Mr M Zuke. That judgment was on remedies, following its earlier judgment on liability, registered on 6 April 2004. The Claimant claimed unfair dismissal and race discrimination. The Respondent denied both the claims. We will refer to the parties as Claimant and Respondent, in accordance with the 2004 Employment Tribunal Regulations.

The facts

3. The Respondent repairs gear boxes for bus companies, train operators and users of mining equipment in south London. The Claimant started work for them as a storeman in the Stores Department on 5 March 1984. He is black, of African Caribbean ethnic origin. Also employed in the stores were Mr Gonsalves who is of Indian origin and was employed before the Claimant, and Mr Presley and Mr Weekes who were employed for one and a half years. In 2003 a redundancy exercise was conducted which involved the selection of one storeman. The axe fell on the Claimant. He was dismissed on 31 March 2003. His dismissal was unfair because selection criteria were applied unfairly to him, the Respondent failed properly to consider alternative employment, and failed on his appeal against his dismissal to consider an important ground of appeal. In addition, the Respondent on the ground of the Claimant's race, treated him less favourably than it treated Mr Weekes who was not dismissed. The Tribunal found this about the Claimant's response:

"4. …He received three months pay in lieu of notice. The Claimant was shocked and stunned at his dismissal. He had been employed by the Respondent for 19 years, and felt that he had been betrayed. He had fleeting thoughts of emigrating, but decided to try to make a new life for himself in a new job. He was extremely fortunate to obtain employment very quickly as a storeman. He began work on 7^th April 2003, albeit at a lower rate of pay.

5. The parties agreed that the Claimant's loss of earnings is £75 a week net.

6. The parties also agreed that if the Claimant had remained in employment with the Respondent he would have received a bonus payment of £1360.56 at the end of 2003. There is no provision for a bonus payment in his current employment.

7. The Claimant's current employment is not pensionable. If the Claimant had not been dismissed it was his intention to remain in the Respondent's employment until the normal retiring age of 65. The Claimant was born in August 1955."

4. The Claimant was paid £1455 a month, taking home £1000. In his new job, at Metrobus, it was agreed he took home £75 per week less. At the date of his dismissal he was 47 and his normal retirement date was 2020.
5. None of the above is in contention apart from the bonus.

The issues on appeal

6. The issues on appeal relate to the calculation of four aspects of the compensation awarded by the Tribunal which were defined by it as follows:

"8.4 The matters in issue were:-

8.1.1. whether the Claimant's earnings during the notice period should be deducted in calculating his loss

8.1.2. the award for future loss of earnings

8.1.3. the length of time for which the Claimant's pension loss should be calculated

8.1.4. the amount of compensation for injury to the Claimant's feelings caused by the racial discrimination."

We will deal with the submissions and our conclusions on each of these in a different order.

Injury to feelings

7. It was common ground before the Employment Tribunal that compensation for injury to feelings should be assessed in accordance with the middle band described by the Court of Appeal in Vento v Chief Constable of West Yorkshire Police [2003] IRLR 103. The band is £5000 to £15000. This is for serious cases which do not merit an award in the highest or lowest band. The lowest band is applicable to a one-off occurrence. It was contended by Mr James Wynne of Counsel, on behalf of the Claimant, that dismissal on grounds of race discrimination is surely a very serious incident and cannot be described as one-off or isolated. We agree. The Tribunal heard the Claimant's reaction to his treatment, over two hearings extending over three days. Its findings (paragraph 3 above) are not in dispute.
8. Ms Alison Russell of Counsel, appearing for the Respondent, contended the award should be £5000. This was on the grounds that the Tribunal failed to give adequate consideration to the discrete nature of the conduct, failed to consider comparative awards within the Judicial Studies Board Guidelines for personal injury, the absence of overt racial hostility and the fact that the sum awarded equated to 10 months' take home pay. In our opinion, once the Tribunal focused by agreement on the middle band in Vento, and since the above findings were not in dispute on appeal, the precise placement of the award at the middle of the middle band, rather than at the extreme bottom end, was a matter of fact and appreciation for it alone. Its judgment was neither wrong in principle nor manifestly excessive. A superficial view of the Claimant's written evidence indicates how serious the effect of the race discrimination was upon him. This ground of appeal is dismissed.

Bonus

9. The Claimant was entitled to a bonus depending on his and the Respondent's performance, which was roughly 10% of his annual salary. For 2003 the Tribunal refused to agree the sum of £1717 claimed by the Claimant and awarded £1360.56 which appeared in the Respondent's counter-schedule. For future losses, the Tribunal awarded a sum in respect of bonus for 2004 at the same figure. The Respondent contended that the Tribunal erred by failing to give reasons for awarding this figure and without any or any adequate evidence.
10. As to the former, there is some substance in this criticism. Nevertheless, it was conceded on appeal that some bonus would have been paid. As to the evidence, the Tribunal had an extract from the staff handbook indicating that bonus would be paid at the discretion of management and evidence from the Claimant that this figure represented about 10% of his gross annual salary. No evidence was put before the Tribunal by the Respondent as to how much would have been paid in 2004. Surprisingly, no figure was put before us either. Ms Russell throughout the day attempted through her instructing solicitor to prise a figure from the Respondent, which was slightly over £1000 making the difference between 2003 and 2004 about £300. We do not consider it right to decide this point by reference to a figure handed to us at the appeal. The Tribunal had to make the best it could of the evidence of the Claimant, apparently unchallenged, and the handbook. Although it gave no reasons for taking this figure, the reasoning is exigible from that evidence. A likely estimate of what the Claimant would receive by way of a 10% bonus in 2004 is that awarded him for 2003. There is no error of law in this assessment and this ground is dismissed.

Future pension loss

11. A number of points arise in respect of pension loss. The principal ground upon which we decide this point in favour of the Respondent emerges from the schedule of losses submitted to the Tribunal. The Claimant's schedule foreshadowed five years' pension loss and the Respondent two and a half years'. The Tribunal came to a provisional view that the figure should be 10 and invited the parties to attach the arithmetic to such figure. The Respondent contends that it had no opportunity to make submissions in respect of 10 years, and in any event 10 years is out of kilter with an award of just over one year's future income loss.
12. In the assessment of pension loss, and its relationship to the assessment of future income loss, it is possible for a Tribunal to take different periods: see Bentwood Bros (Manchester) Ltd v Shepherd [2003] IRLR 364 CA at paragraph 13 per Peter Gibson LJ. It can do that by using, and referring to, the Tribunal's knowledge of local conditions and any special features which it has in mind. The Tribunal in our case did neither. It is beyond the ken of the experienced negotiators and litigators on this Appeal Tribunal for a dispute as between two and a half and five to be resolved at a figure of 10, in whatever currency is being used. The Respondent justly complains that it did not have an opportunity to meet this case, or to deal with any special features the Tribunal might have had in mind. It is not an answer to say that the Respondent's solicitor, who was conducting the Remedies Hearing, heard the provisional view of the Tribunal, and could then have made representations. Nor we think is it explicable on the grounds that Mr Wynne was at that time a very junior barrister who may have needed assistance. That was not the view of the Employment Tribunal and from what we have seen he needed none. It may well be that 10 years is the correct figure. Mr Wynne told us, without dissent from Ms Russell, that application of the Ogden Tables, and making allowances for contingencies, would yield about 10 years' pension loss for a 47 year old man expecting to retire at age 65. But if the Tribunal were to take an approach based on the Ogden Tables, it was bound to say so. This ground of appeal succeeds. It will be remitted to the same Employment Tribunal for it to hear any further submissions relating to pension loss in the future. The Tribunal awarded £15,750. The Respondent accepted before us that it would not dispute an award based on five years' future loss. The practical difference between the parties therefore on this ground is £7875.

Credit for earnings during the period of notice

13. By section 86 of Employment Rights Act 1996, an employee is entitled to one week's notice, as a minimum, for each year of continuous employment up to a maximum of 12. With the Claimant's 19 years of service, the figure in his case was 12 weeks minimum. The Claimant was entitled to, and was given, three months' pay in lieu of notice ie 13 weeks. After the first week he obtained employment paying £75 per week net less at Metrobus. Roughly speaking he earned £2,400 in this 12 week period. The Tribunal did not deduct this from the award against the Respondent. It did not do so because it followed Norton Tool Co Ltd v Tewson [1972] IRLR 86 NIRC Sir John Donaldson P and members, which it said was affirmed in Babcock FATA Ltd v Addison [1987] IRLR173 CA, and declined to follow Hardy v Polk (Leeds) Ltd [2004] IRLR 420 EAT Burton P and members. Mr Wynne contends that the Tribunal was right so to do for Hardy is wrongly decided or its facts can be distinguished from the present case. Ms Russell on the other hand contends that Hardy represents the correct view of the assessment of loss.
14. The Tribunal in this case awarded compensation in respect of both unfair dismissal and race discrimination. There were two reasons for this. First, the approach to compensation under the different statutes is different, and each provides different heads of compensation. Secondly, a tactical decision was taken by Mr Wynne to ask the Tribunal to assess compensation for loss of earnings under the Employment Rights Act for unfair dismissal and not under the Race Relations Act, since he knew that the former would yield a higher figure. In order to understand the interplay of these two statutes it is necessary to look at their different wording.
15. Section 126 of the Employment Rights Act contains a rule against double counting when compensation is assessed in respect of the statutory torts of unfair dismissal and race discrimination:

"126(2) An employment tribunal shall not award compensation under any one of those… Acts in respect of any loss or other matter which is or has been taken into account under any other of them by the tribunal (or another employment tribunal) in awarding compensation on the same or another complaint in respect of that act."

16. For unfair dismissal, once the primary remedies of reinstatement and reengagement have been considered and rejected, the Tribunal must consider compensation: section 112. Compensation consists, in the ordinary case, of a compensatory award and a basic award. The basic award is calculated on a formula relating to length of continuous service and age. It is practically equivalent to redundancy pay. In the present case, the Claimant received a redundancy payment and so he was not entitled to receive a basic award: section 122(4).
17. A compensatory award is assessed as follows:

"123 (1) Subject to the provisions of this section and sections 124, 126, 127 and 127A(1), (3), and (4), the amount of the compensatory award shall be such amount as the tribunal considers just and equitable in all the circumstances having regard to the loss sustained by the complainant in consequence of the dismissal in so far as that loss is attributable to action taken by the employer.

(2) The loss referred to in subsection (1) shall be taken to include-

(a) any expenses reasonably incurred by the complainant in consequence of the dismissal, and

(b) subject to subsection (3), loss of any benefit which he might reasonably be expected to have had but for the dismissal.

(4) In ascertaining the loss referred to in subsection (1) the tribunal shall apply the same rule concerning the duty of a person to mitigate his loss as applies to damages recoverable under the common law of England and Wales or (as the case may be) Scotland."

18. Remedies for race discrimination include compensation, for section 56(1)(b) of the Race Relations Act 1976 provides:

"56 (1) Where an employment tribunal finds that a complaint presented to it under section 54 is well-founded, the tribunal shall make such of the following as it considers just and equitable-

…(b) an order requiring the respondent to pay to the complainant compensation of an amount corresponding to any damages he could have been ordered by a county court or by a sheriff court to pay to the complainant if the complaint had fallen to be dealt with under section 57;"

Section 57(4) refers to injury to feelings as follows:

"(4) For the avoidance of doubt it is hereby declared that damages in respect of an unlawful act of discrimination may include compensation for injury to feelings whether or not they include compensation under any other head."

Compensation awarded under the Race Relations Act is subject to an award of interest: section 56(5) and Employment Tribunals (Interest on Awards in Discrimination Cases) Regulations 1996. The link from section 56 to section 57 means that section 57 applies and this provides that a claim "may be made the subject of civil proceedings in like manner as any other claim in tort ...". Thus it is common ground that a claim of race discrimination is subject to the tortious approach to the assessment of damages, as is a claim for wrongful dismissal. In both such cases, Mr Wynne accepts that a claimant must give credit for money earned during the period during which a payment in lieu of notice has been made. A different approach, he contends on authority, is required for unfair dismissal. An eclectic approach may therefore be taken where awards have be sought in favour of a Claimant under both statutes. A basic award may only be made in an unfair dismissal case; an award for injury to feelings only in a discrimination case. A compensatory award for loss of earnings may be made for unfair dismissal and an award of damages for loss of earnings for race discrimination. At first sight, both statutes seeking to compensate for loss of earnings as a result of a statutory tort should yield the same result but whether they do requires an examination of the authorities.

19. A straightforward answer to this question could be found in the competing schedules before the Employment Tribunal. Both Claimant and Respondent based their calculations on losses beginning after the end of the notice period in June 2003. The Claimant made no claim for loss for the first three months after his dismissal. So loss during the notice period ought not to have been an issue. However, we are told that notwithstanding the exchange of schedules a live issue arose as to the compensation forthcoming during the notice period.
20. In Norton (above), an employee who was entitled to six weeks' notice was unfairly dismissed and obtained new work after four. The NIRC decided that he did not need, when claiming compensation for unfair dismissal, to give credit to his former employer for the two weeks covered by the notice period when he had obtained new work. That was because the NIRC held this (at 504D):

"In our judgment the common law rules and authorities on wrongful dismissal are irrelevant. That course is quite unaffected by the Act which has created an entirely new cause of action, namely the 'unfair industrial practice' of unfair dismissal. The measure of compensation for that statutory wrong is itself the creature of statute and s to be found in the Act and nowhere else. But we do not consider that Parliament intended the Court or tribunal to dispense compensation arbitrarily. On the other hand the amount has a discretionary element and is not to be assessed by adopting the approach of a conscientious and skilled accountant or actuary. Nevertheless that discretion is to be exercised judicially and upon the basis of the principle."

The NIRC had considered the common law rules relating to the duty to mitigate, including the express reference to that duty in the Industrial Relations Act of which section 123(4) of the Employment Rights Act is the lineal descendant. It considered the concept of an "unfair industrial practice" introduced by the Industrial Relations Act and noted that it included unfair dismissal. Such a practice could be committed by an employer, a trade union or a person. Compensation for a victim of all such practices was to be assessed on the same "just and equitable" basis. When the Act was repealed so was that concept, but unfair dismissal and the compensation provisions were re-enacted. Going hand-in-hand with that concept was the purpose of the Act as expressed in section 1(1) of "promoting good industrial relations". It was held that good industrial practice required an employer to meet its obligations to provide notice or money in lieu.

21. Applying the new principles, different from the common law principles, to the facts in the case the NIRC said as follows:

"The Contracts of Employment Act, 1963 as amended by the Industrial Relations Act, 1971, entitles a worker with more than 10 years continuous employment to not less than 6 weeks' notice to terminate his employment. Good industrial practice requires the employer either to give this notice or pay 6 weeks' wages in lieu. Mr Tewson was given neither. In an action for damagers for wrongful, as opposed to 'unfair' dismissal he could have claimed this 6 weeks' wages, but would have had to give credit for anything which he earned or could have earned in the last two weeks, thus reducing his claim to about 4 weeks' wages. But if he had been paid the wages in lieu of notice at the time of his dismissal, he would not have had to make any repayment upon obtaining further employment during the notice period. In the context of compensation for unfair dismissal we think that it is appropriate and in accordance with the intentions of Parliament that we should treat an employee as having suffered a loss in so far as he received less than he would have received in accordance with good industrial practice. Accordingly no deduction has been made for his earnings during the notice period."

This was the first of the four heads of loss the NIRC was required to consider when applying the principles.

22. Fifteen years later, the principles came on for reconsideration in the Court of Appeal in Babcock FATA Ltd v Addison [1987] IRLR 173 where, now, Sir John Donaldson MR said:

"In substance section 74 re-enacts section 116 of the Industrial Relations Act 1971, and I have no reason to resile from the view which, in an earlier guise or disguise, I expressed in Norton Tool Co. Ltd. v. Tewson [1973] 1 WLR 45, 48, namely that the amount of the award is governed by the statute and nothing else, that it involves a discretionary element and is not to be assessed by adopting the approach of a conscientious and skilled cost accountant or actuary, but that the discretion has to be exercised judicially and upon the basis of principle, the object being to compensate, and compensate fully, but not to award a bonus."

He cited (at paragraph 46) a selection from the considerable number of authorities which had also followed Norton, none of which was binding on the Court of Appeal. He did however expressly conclude that Norton was rightly decided (paragraph 50). He did not regard Norton as "holy writ" (paragraph 47), nor regard it as a rule of law for he said as follows:

"That rule is that, in assessing compensation for unfair dismissal, it is just and equitable to regard a claimant as having suffered an additional loss if the employer in unfairly dismissing him did not otherwise act in accordance with good industrial practice. That there is nothing inconsistent in expecting an employer who dismisses unfairly so to act is well illustrated by the instant case, where the employer did just that. What Norton's [1972] IRLR86 case did not, and could not, decide as a rule of law, was that in all circumstances good industrial practice required that notice of dismissal should be accompanied by the payment of 'money in lieu'. Good industrial relations practice can change and, in any event, what is good industrial practice in relation to a weekly wage earner entitled to notice measured in weeks, may be quite different from that which is appropriate in the case of senior salaried staff entitled to notice measured in months or years."

23. It must be borne in mind that what the employee was claiming in Babcock was an award of compensation from his former employer for the whole of the period while he was unemployed after the dismissal, plus five weeks' pay in lieu of notice which good industrial practice would have afforded him had he been dismissed with others a year later. He did not obtain employment during the notice period. Thus, Babcock is not an authority directly on the requirement or otherwise to give credit for payment received from a new employer during the period of notice. However, in addition to expressing the view that the principle in Norton case was not a rule of law, Ralph Gibson LJ expressly followed it: paragraphs 20 and 21. He added the judgment that not every case requires, as a matter of good industrial practice, for the full notice money to be given. It might include consideration, for example, of the likelihood of the employee getting new employment within a short period of time: paragraph 21. He said:

"…the principle, when applicable on the basis of good industrial practice, secures to the dismissed employee the opportunity to earn during the period of notice without giving credit for earnings from another employer against wages due during the period of notice. It does not secure to him anything in addition to the amount of wages due during the period of notice: he can only get the extra if he gets the new job and thereby earnings from another employer."

For that reason, Ralph Gibson LJ, with whom Sir John Donaldson MR agreed, (Bingham LJ agreeing with both) held that the employee was not entitled to receive from his former employer compensation for loss of wages and in addition payment of a sum equivalent to his notice money. In doing so Ralph Gibson LJ followed the judgment of the EAT, Browne-Wilkinson P and members in T B A Industrial Products Ltd v Locke [1984] IRLR 48 that:

"…the line of authorities stemming from Norton… is not unsound in principle and there has been no change in the law or practice which merits a departure from it. …

In making exactly the same assessment (i.e. the loss suffered by the employee) the Norton line of cases starts from a different premise, i.e. that the employer would act not only in accordance with his contractual duties but also in accordance with good industrial practice which would require (in the absence of gross misconduct) that an employee who is summarily dismissed should at the time of his dismissal be paid a payment in lieu of notice covering the notice period. If such good industrial practice is adopted, there is no right for the employer to recover any part of it from the ex-employee if, during the notice period, he obtains alternative employment. Therefore, on this basis the loss suffered by the employee is the full amount of his wages during the notice period without any deduction for wages from the alternative employment."

24. A post-Babcock reflection of the EAT was given by Popplewell P and members in Isleworth Studios Ltd v Rickard [1988] IRLR 137 where the following was said:

"As we read the decision in Babcock [1987] IRLR 173 it is this. Norton's [1972] IRLR 86 case is so embedded in the law that it is to be treated as a rule of law. The principle is very limited in its concept and is not to be extended. An Industrial Tribunal when considering cases where employees are entitled either to years' notice or months' notice or with a fixed-term contract may have regard to what is good industrial practice. They must also have regard to the statute and to the principle that the award is intended to be compensatory and not to provide a bonus for the Claimant."

25. In our judgment, the principle in Norton continues to be binding authority of the Court of Appeal. It is open to an employment tribunal to decide in accordance with good industrial practice that a former employee who obtains new employment during a notice period is not required to give credit for it.
26. Into what we regard as that settled area of law, which survived the demise of the Industrial Relations Act and its unfair industrial practices, was injected the judgment of the EAT, Burton P and members in Hardy v Polk (Leeds) Ltd [2004] IRLR 420. An employee unfairly dismissed in that case, entitled by contract to seven weeks' notice pay, obtained work from a competitor after four. When she appealed in person (only the employer was represented), the EAT supported the Employment Tribunal's decision that she was in effect required to give credit for the three weeks' earnings during the notice period. It declined to follow Norton, which it acknowledged was followed by the Court of Appeal in Babcock. Two reasons were given. First, it was said (paragraphs 28 and 29) that:

"Neither the decision in Norton Tool nor the decision in Babcock made any reference to the duty to mitigate, which is now enshrined in s.123(4) of the 1996 Act."

And it held that both of those decisions "overlooked the provision of the relevant mitigation subsection". With respect, these two assertions do not withstand even superficial scrutiny of the two judgments and might be described as a surely unique instance of this Homeric bench nodding, were it not for the fact that Burton P obiter in Morgans v Alpha Plus Security Ltd EAT/438/04 has recently affirmed Hardy. We say that because Sir John Donaldson P cites the relevant subsection in his précis of "the duty of a complainant to take reasonable steps to mitigate his own loss" emerging from that subsection. Mitigation is again referred to by reference to his depiction of counsel's submissions as to the common law (paragraph 3). In his judjment in Babcock (at paragraph 49) there is reference to "the common law duty to mitigate damage". Further, Ralph Gibson LJ covers the principle of mitigation in paragraphs 12-25 of his judgment. During the course of that he himself mentions, or cites from a judgment which mentions, the duty to mitigate on at least five occasions (paragraphs 13, 17, 19, 21, 24).

27. Ralph Gibson LJ noted that the provisions in section 116(1) and (2) of the Industrial Relations Act 1971 were essentially the same as those in section 74 of the Employment Protection (Consolidation) Act 1978 and are now found, so far as is relevant, in section 123(1) and (4) of the Employment Rights Act 1996 (see paragraph 18 in Babcock).
28. On the basis of its view of Norton and Babcock expressed in Hardy, the EAT felt entitled to follow Isleworth (above) at paragraph 27. But if the premise – that mitigation was not mentioned in those two cases - is unsustainable so is the reliance upon Isleworth. In any event, Isleworth simply reflects what Ralph Gibson LJ had said: that the principle in Norton is not immutable, or as Sir John Donaldson MR put it, "holy writ".
29. The second reason for the departure in Hardy from the established principles in Norton was that the EAT felt itself bound by the judgment of the Court of Appeal in Cerberus Software Ltd v Rowley [2001] IRLR 160 (see Hardy at paragraph 29). It was accepted before us that Cerberus is a case on wrongful dismissal and is not directly applicable to the principles of unfair dismissal. It is common ground in this case that wrongful dismissal and discrimination on the one hand, and unfair dismissal on the other, are regulated by different principles. It is the extent of any overlapping principles which is the subject of this appeal. It is instructive to note that in Cerberus the Court of Appeal was not referred to Norton or to any other unfair dismissal case involving the assessment of compensation. In our judgment that authority does not assist in deciding the issue in this appeal and, if we are right, in Hardy either.
30. In Dunnachie v Kingston Upon Hull City Council [2004] ICR 1052 the House of Lords was called upon to consider, in the light of Norton, whether compensation for unfair dismissal under section 123 of the Employment Rights Act could include compensation for non-pecuniary losses such as injury to feelings. Lord Steyn gave the principal speech with whom the other four Law Lords agreed, Lord Rodger adding some further observations in support. In simple and clear terms, Lord Steyn upheld the principles for the assessment of loss first set out by Sir John Donaldson P in Norton, and held that such principles did not include compensation for non-pecuniary loss. Lord Steyn adopted a lengthy citation of the legal authorities prior to the judgment of the House of Lords in Johnson v Unisys [2001] ICR 480 as embodied in the judgment of the EAT Burton P and members ([2003] ICR 1301 paras 9-10) cited at paragraph 14 of Lord Steyn's speech. Lord Steyn added:

"The accuracy of this account of the law in action was not disputed before the House."

With only one exception, which was not adopted, no academic criticism of the decision in Norton had been made.

31. Although the judgment in Dunnachie expressly focuses on section 123(1) – the general principle of just and equitable compensation – and no mention is made of section 123(4), it is clear to us that the House of Lords was upholding the principles in Norton, and also the application of those principles to the facts in Norton. Dunnachie is indirect reinforcement of the principle in Norton that that good industrial practice (usually, but not by holy writ) requires a dismissed employee to be paid by his or her employer the equivalent of notice pay, and that such employee is not required to bring into account any earnings during the period covered by notice pay. Certainly, the House did not regard the award of compensation under the head of "good industrial practice" as a non-pecuniary loss for which, on its ruling, no compensation would be payable. Such criticisms as had been made judicially of the principle in Norton were all set out by the Court of Appeal in Babcock. That court was not required itself to rule on whether earnings during a notice period should be brought into account, for the claimant in that case had not taken work during the notice period; nevertheless the unanimous court reasserted the principle of "good industrial practice" and its practical application as illustrated in Norton.
32. It was also contended that Hardy could be distinguished since it involved the rather extreme facts of an employee leaving to work for a direct competitor. Those facts are very different from the facts in our case, unfair and discriminatory selection for redundancy of a long-serving employee, and that might well affect the approach to what is regarded as good industrial practice. It is plain enough to us that the EAT in Hardy was considering the situation of an employee who "was going to go off within the notice period and work for a competitor, or, indeed, another employer" (paragraph 18) meaning that the principle was applicable in all cases. Nevertheless, we do distinguish the facts in that case from the facts in ours and if a flexible approach to good industrial practice produces different results, that is what was intended following the judgments in Babcock and Isleworth.
33. We make two observations. We do not consider that the concept of good industrial practice is any less a matter worth promoting than it was in 1971. In 1975, ACAS was put on a statutory independent footing and a brief look at its website www.acas.org.uk, which includes its statutory Codes and other helpful material, reveals that in the forefront of all it does is the promotion of good employment relations practice. No doubt that language is a reflection of the change in all statutes from "industrial" to "employment" required to be made by Employment Rights (Dispute Resolution) Act 1998 section 1(2)(b). Accordingly modernised, the goal of good industrial practice has long survived the demise of the Industrial Relations Act and its unfair industrial practices. We consider it is the job of our specialist tribunals, in applying the law, to shape good employment relations practice.
34. As long ago as 1982 the EAT decided Williams v Compair Maxam Ltd [1982] ICR 156, still cited and applied across the jurisdiction. There, Browne-Wilkinson P said at page 160-161B:

"In considering whether the decision of an [employment] tribunal is perverse in a legal sense, there is one feature which does not occur in other jurisdictions where there is a right of appeal only on a point of law. The [employment tribunal] is an industrial jury which brings to its task a knowledge of industrial relations both from the viewpoint of the employer and the employee. Matters of good industrial relations are not proved before an [employment] tribunal as they would be proved ordinary court: the lay members are taken to know them. The lay members of the [employment tribunal] bring to their task their expertise in a field where conventions and practices are of the greatest importance. Therefore in considering whether the decision of an [employment] tribunal is perverse, it is not safe to rely solely on the common sense of those who have no experience in the field of industrial relations. A course of conduct which to those who have no practical experience with industrial relations might appear unfair or unreasonable, to those with specialist knowledge and experience might appear both fair and reasonable: and vice versa.

For this reason, it seems to us that the correct approach is to consider whether an [employment] tribunal, properly directed in law and properly appreciating what is currently regarded as fair industrial practice, could have reached the decision by the majority of this tribunal. We have reached the conclusion that it could not."

35. Secondly, while at first sight surprising to common lawyers that in the assessment of loss, compensation is not reduced to reflect new earnings in a notice period, it is wholly understandable once it was decided in Norton that common law rules do not apply. The NIRC was at pains to point out that the principle was, nevertheless, "loss," and injury to feelings was excluded. That was affirmed in Dunnachie. In neither case, nor in Babcock, was it said that the award of notice pay in full, in a case where good industrial practice called for it, offended the concept of loss for which it was just and equitable to order reparation. But that is not the only departure from the common law. A basic award is payable, regardless of loss: section 118. If an order for reinstatement is made and not complied with, an additional award must be made, regardless of loss: section 117. In an ordinary case, the compensatory award is capped in 2005 at £56,800, regardless of loss: section 124. Unfair dismissal compensation is indeed built on its own principles.
36. For these reasons therefore we hold that the principle in Norton entitled the Tribunal, to hold in accordance with good employment relations practice that when the employer paid the employee in lieu of his three months' notice, the employee was not required to give credit for his earnings during that period. In our judgment, the principle in Norton, and its application to earnings during a notice period, were binding on the Employment Tribunal by reason of the judgment in Norton, and is binding upon us by reason of the adoption of that principle in Babcock. To the submissions made on behalf of the Claimant that the EAT wrongly decided Hardy, in the light of the factual distinction between that case and ours, and of the clear references in Norton and Babcock to the duty to mitigate, which were overlooked by the EAT, and its reliance on Cerberus, not supported before us, we will decline to follow Hardy.
37. We would very much like to thank both Counsel for their helpful written and oral submissions. Since the Respondent does not now resist the Claimant's original schedule of five years' future loss, and did not resist the reading of the Ogden Tables at about 10 years if they are to be applied, we hope the parties may be able to resolve the question of future pension loss between them or by recourse to ACAS, since this case is now back in the Employment Tribunal. The appeal is allowed in part, to be remitted to the same Employment Tribunal. Parties to apply forthwith for a half day hearing. Claimant to serve evidence and schedule of loss in 14 days, Respondent the same 14 days thereafter. The Respondent to report to the Employment Tribunal that it has paid all the undisputed sums, or if not to say why.