Appeal No. UKEAT/0382/12/JOJ
EMPLOYMENT APPEAL TRIBUNAL
FLEETBANK HOUSE, 2-6 SALISBURY SQUARE, LONDON EC4Y 8JX
At
the Tribunal
On
23 January 2013
Before
MR RECORDER
LUBA QC
MR C EDWARDS
MR M WORTHINGTON
AVIA
TECHNIQUE LTD APPELLANT
MS R KALIA RESPONDENT
Transcript of Proceedings
JUDGMENT
SUMMARY
UNFAIR DISMISSAL – Calculation of compensatory award
Having been unfairly dismissed, the employee took short term
lower paid employment. But after a few weeks she fell ill and incapable of
work. The Employment Tribunal made a compensatory award of 40 weeks from
dismissal assessed at the difference between her old and new pay rates. On
appeal, the employer argued:
(1) Supervening
and incapacitating ill-health should have triggered a cut-off to the
compensatory award; or
(2) After
she became ill, the former employee suffered no loss because she received
statutory sick pay from the new employer at same rate the old employer would
have paid.
Appeal allowed on ground 2. Compensatory award reduced to actual
loss (i.e. difference between old pay and new pay for the weeks the employee
had been able to work).
Appeal did not succeed on ground 1 because the law recognised no
such cut-off.
MR RECORDER LUBA QC
Introduction
1.
This an employer’s appeal against the amount of an award of compensation
for unfair dismissal made by an Employment Tribunal. The employer’s case is
that the award was vitiated by an error of principle made by the Tribunal and
must be set aside. The employee seeks to uphold the Employment Tribunal’s
award contending that no error of principle was made.
The background facts
2.
Ms Kalia had worked for the employer, Avia Technique Ltd, from
April 2008. On 25 October 2010 she was dismissed and paid a
month’s salary in lieu of notice. The reason given for dismissal was
redundancy and so she also received a statutory redundancy payment. Arising
from that dismissal, Ms Kalia brought various claims before the Employment
Tribunal.
3.
After a three‑day hearing, the Employment Tribunal at Reading
(Employment Judge Gumbiti‑Zimuto and members) upheld her claims of
harassment on the grounds of race and sex, victimisation and unfair dismissal.
The employer does not contest those findings on liability.
4.
The Employment Tribunal made an award of compensation in the sum of
£10,073.14 in respect of the victimisation and harassment. That award is not
challenged on appeal. The Employment Tribunal also made an award of £11,070.80
in respect of unfair dismissal. It is from that compensatory award for unfair
dismissal that this appeal is brought.
Relevant law
5.
An Employment Tribunal’s remit in determining a compensatory award for
unfair dismissal is fixed by the terms of s.123 of the Employment Rights Act
1996. Subsection (1) of that section provides as follows:
“[…] 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.”
The Employment Tribunal’s Judgment
6.
The Employment Tribunal addressed the question of any compensatory award
and its amount in Part 5 of their Judgment on remedy. Part 5,
paragraphs 5.1 to 5.8 inclusive, give their reasoning:
“5. Compensation for unfair dismissal:
5.1 The Claimant has been unemployed for the majority of time
since her dismissal. The Tribunal have been asked by the Claimant to take into
account the Claimant’s health in assessing compensation. The Claimant has not
produced any evidence from which we are able to conclude that there is a causal
link between the serious ill-health suffered by the Claimant and her treatment
by the Respondent.
5.2 The Tribunal acknowledge that the Claimant has made efforts
to mitigate her loss by seeking alternative employment. The Claimant’s
assertion that she was applying for 60 jobs a week is not supported by any
documentary evidence and is challenged by the Respondent. The Claimant did
obtain employment with the Royal Mail in November 2010. The employment however
was frustrated by the fact that the Claimant became ill in around December
2010.
5.3 Taking account of the general economic climate and the fact
that the Claimant was someone who the parties described as having excellent IT
skills we consider that it could reasonably be expected that the Claimant would
secure new employment so that she was able to mitigate her losses entirely
within a period of about 6 to 12 months. The Tribunal therefore assesses the
Claimant’s loss from her employment for period of 40 weeks.
5.4 In her employment with Royal Mail the Claimant earned
£684.00. She received SSP in the sum of £2,100.00.
5.5 The Claimant’s net pay in the employment of the Respondent
was £337.62 per week.
5.6 The Claimant’s loss for [the] period of 40 weeks is
£13,504.80.
5.7 The Tribunal considers that it is appropriate to make an
award compensating the Claimant for loss of statutory rights in the sum of
£350.00.
5.8 The Claimants loss giving credit for the sums set out in
paragraph [5.4] against the total loss of £13,854.80 is £11,070.80.”
7.
In recounting 5.8 of the Tribunal’s reasoning we insert after the word
‘paragraph’, in that sub-paragraph, the reference 5.4. So that
paragraph 5.8 reads:
“The Claimant’s loss giving credit for the sums set out in
paragraph [5.4] against the total loss […]”
Submissions
8.
The employer’s case is that the Employment Tribunal’s reasoning
discloses an error of principle. The employer’s case is put in two ways by its
representative, Mr Rees. He submits firstly that the Tribunal assessed
compensation based on a period of 40 weeks running from the date of
dismissal. Its award, he asserts, is intended to reflect a loss of earnings by
the Tribunal over that period. However, he submits that the fact is that for
the majority of that 40‑week period Ms Kalia was incapable of any
work for a reason wholly unconnected with her previous employment.
9.
Mr Rees submits that the Employment Tribunal erred in principle in
compensating the employee for loss of earnings in respect of a period of
incapacity for work wholly unconnected with her former employment or the
circumstances of her dismissal. The employer’s case is that the compensation
should be limited to a seven‑week period following dismissal during which
the employee had been fit for work. As Mr Rees put it to us, the Tribunal
should have identified a cut‑off point, that being the point in time at
which the employee became incapable of work. From that point forward she ought
not to have been given any compensatory award.
10.
In support of the proposition that there is, and should have been
imposed, such a stark cut‑off point, Mr Rees relies on the decision
of the Employment Appeal Tribunal in the case of Devine v Designer Flowers Wholesale Florists Sundries Limited
[1993] IRLR 517. In that case Lord Coulsfield, giving the Judgment of the
Employment Appeal Tribunal, said as follows at paragraph 2:
“There were three possible situations concerning dismissal and
ill health. Firstly, an employee might become ill after a dismissal without
there being any relationship between the dismissal and the ill health. For
example, if the employee sustained a broken leg. In that case he would not be
entitled to claim compensation from his employer in respect of the period from
which he was unfit for work […]”
11.
The second and third alternatives mentioned by Lord Coulsfield are
not presently relevant. Thus, it is submitted by Mr Rees that there has
here been a supervening event at the end of seven weeks after the termination
of employment and that the compensation ought, by law, to have stopped then.
That is the first way in which the employer’s case was put to us.
12.
In the alternative, Mr Rees submits that if there was not a cut‑off
point, in any event the Tribunal was required to have regard to what would have
occurred had the employee remained in employment and then suffered the ill
health that she did in fact suffer.
13.
His case is that the evidence before the Tribunal was that the only
support or assistance she would have derived in her continued employment was an
entitlement to Statutory Sick Pay. In the events which happened she received
Statutory Sick Pay from an alternative employer and, accordingly, she suffered
no loss.
14.
For the employee in this case, Mr Steven Fuller invites us to
dismiss the appeal. As to the first way in which the case for the employer is
put, he submits that there is no cut‑off required where a supervening
illness or injury is suffered by a former employee. He invites us to prefer a
more modern approach by the Employment Appeal Tribunal represented not least by
the decision in the case of Wood v Mitchell S.A. Limited
UKEAT/0018/10/CEA. He meets the alternative way in which the employer’s case
is put by submitting that in this case the Tribunal was fixing a period of
40 weeks as the period for which the employee might be expected to be
entitled to compensation once she was fully fit for work.
Discussion
15.
We were rightly reminded in the skeleton arguments before us that the
statutory rubric of s.123(1) confers a good deal of discretionary judgement on
an Employment Tribunal in fixing a compensatory award and, secondly, that
awards of compensation should not be lightly interfered with on appeal,
certainly not in the absence of any error of principle.
16.
We turn then to the employer’s two asserted errors of principle in this
case. As to the first we say immediately that we are not satisfied that the
Employment Tribunal erred in law in failing to identify a cut‑off point
for the award of compensation in the light of the serious illness developed by
the employee in this case after the termination of her employment. To the
extent that the passage we have referred to in the Judgment in Devine
suggests to the contrary, we respectfully disagree with it.
17.
We prefer the approach taken by this Employment Appeal Tribunal in the Wood
case. In particular, in that case, this Employment Appeal Tribunal re-stated
the guidance that had been given by it in the earlier decision Software 2000 Ltd v Andrews
[2007] IRLR 568. As appears in paragraph 17 of the Judgment in Wood,
the correct approach for the Tribunal is to assess the loss flowing from a
dismissal using commonsense, experience and a sense of justice.
18.
It requires a Tribunal ordinarily to ask: for what period would the
employee have remained in employment but for the dismissal? The ascertainment
of such a period must be taken to subsume the possibility that during such a
period the employee may, by reason of some accident, injury or illness, become
incapable of work or of reduced capacity. The appropriate question then
becomes: what would have happened in relation to such illness or injury but for
the dismissal? If the employment would have continued and wages or salary would
have continued to have been paid during that period of illness or injury then,
it seems to us, that such a loss can be said to be a loss attributable to the
dismissal.
19.
We, therefore, reject the first of the two ways in which the employer’s
case has been put to us. We do not accept that the Tribunal erred in failing
to adopt a cut‑off point at the point at which the former employee became
incapable of work. We then turn to the second way in which the employer’s case
is put on appeal.
20.
We record, again, that there is no disagreement from the employer with
the Tribunal’s assessment that it would have taken the employee a period of
some 40 weeks to find at least equivalent, if not better, employment. The
case for the employer is that the Tribunal was treating the 40 weeks as
starting at the date of termination of the employment. Mr Rees, for the
employer, submits that if that is correct, i.e. the 40 weeks started with
the effective date of termination of employment, there was no continuing loss
in this case. That is because the employee’s entitlement from her former
employers in the circumstances of sickness or injury would only have been to Statutory
Sick Pay. Yet that is exactly the payment she received as a result of the employment
that she did obtain within the 40‑week period.
21.
The crucial question, therefore, on this second aspect of the appeal, is
when the Tribunal were treating the 40‑week period as having started. Were
they, as Mr Rees submits, treating it as having started from the effective
date of termination or were they, as Mr Fuller contended, treating it as
starting from the next period after which the employee would be fit and
available for work. On our reading of Part 5 of the Tribunal’s Judgment
there is only one way in which that question can be answered. It is that the
Tribunal were treating the 40 weeks as starting from the termination of
the employment. Not least, that is because it is only logically consistent
with that approach to have set off, as the Tribunal did, the sums received from
other sources within that 40‑week period by way of wages and Statutory
Sick Pay. Mr Fuller acknowledges that his case on this aspect is
inconsistent with such set-off and he suggests that the employee might have
brought a cross‑appeal contending that the Tribunal had erred in making
such a set off.
22.
In the event, there was no such cross‑appeal. But, in our
judgment, it would have been doomed to fail. Here the Tribunal were, on any
fair reading of Part 5 of their written reasons, intending to identify
with certainty the period for which they were awarding compensation and that
period was a period of 40 weeks running from the date of termination of
the employment. The Tribunal treated the employee as suffering the continuing
loss of her full previous wages for the 40‑week period, even after the
date at which she became incapable of work. They did so in circumstances where
it is agreed between the parties that the terms of her previous employment only
entitled her to Statutory Sick Pay. To have adopted a compensatory assessment
based on an entitlement to the full previous wages or salary seems to us
to have been manifestly in error of principle and law. Any compensation should
have been limited to the difference between what she did receive, that is to
say, Statutory Sick Pay from her subsequent employer, and what payment she
would have received, while sick, from her previous employer. In fact, on the
evidence in this case, her entitlement was precisely the same and, accordingly,
there was no such loss. The Employment Tribunal, accordingly, erred in law and
the employer has, on this appeal, made out its second or alternative ground.
23.
In those circumstances, we shall set aside the Employment Tribunal’s
compensatory award and we shall hear representations from both parties on the
appropriate order for us to make in relation to the quantum of compensation.
Order
24.
Our order arising from the Judgment we have just delivered, in the light
of the representations as to the terms of our order, will be as follows.
First, the appeal is allowed. Second, the compensatory award made by the
Employment Tribunal in the sum of £11,070.80 is set aside. Third, in place of
that award there shall be an award of compensation for unfair dismissal and
loss of statutory rights of £350.
