Saturday, April 13, 2024

EVERYDAY LAW: Compensation for wrongful dismissal


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Based on the letters I have received, it is obvious that some people have formed the view that the Employment Rights Act not only has opened new areas of redress but it will also permit claims for very large awards of damages, embracing among other things, claims for loss of reputation and injured feelings.
In the case of Johnson v Unisys discussed last week, the court held that such non-pecuniary losses were not recoverable in actions for wrongful dismissal.
However, some of the utterances of the judges in the case led to the belief that in an action for unfair dismissal such losses were recoverable. Indeed, for a period of time after the decision in that case, industrial tribunals in Britain had in fact given awards for such non-pecuniary losses.
In 2004, the House of Lords had to decide whether the provisions of the Employment Rights Act relating to a compensatory award permitted a tribunal or a court to make an award for non-financial damage. In the case that went before the court, an employer claimed to have suffered humiliation, injury to feelings and distress as a result of a constructive dismissal.
The tribunal awarded the employee $10 000. The Employment Appeal Tribunal allowed the employer’s appeal. The Court of Appeal then ruled that the award for injury to feelings would be sustained based on the legislation.
The matter then went before the House of Lords. The House of Lords adopted the position taken in by the National Industrial Relations Court in a previous case known as Norton Tool Co. v Tewson (1972) in which Sir John Donaldson, sitting as president, made the following remarks:
“In our judgment, the common law rules and authorities on wrongful dismissal are irrelevant. That cause of action is quite unaffected by the Industrial Relations Act 1971 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 is to be found in the Act of 1971 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 cost accountant or actuary. Nevertheless, that discretion is to be exercised judicially and upon the basis of principle.
“The court or tribunal is enjoined to assess compensation in an amount which is just and equitable in all the circumstances, and there is neither justice nor equity in a failure to act in accordance with principle. The principles to be adopted emerge from Section 116 of the Act of 1971.
“First, the object is to compensate, and compensate fully, but not to award a bonus, save possibly in the special case of a refusal by an employer to make an effort of employment in accordance with the recommendation of the court or a tribunal.
“Secondly, the amount to be awarded is that which is just and equitable in all the circumstances, having regard to the loss sustained by the complainant. ‘Loss’ in the context of section 116 does not include injury to pride or feelings. In its natural meaning the word is not to be so construed, and that this meaning is intended seems to us to be clear from the elaboration contained in Section 116 (2).
“The discretionary element is introduced by the words ‘having regard to the loss’. This does not mean that the court or tribunal can have regard to other matters, but rather that the amount of the compensation is not precisely and arithmetically related to the proved loss.
“Such a provision will be seen to be natural and possibly essential, when it is remembered that the claims with which the court and tribunals are concerned are more often than not presented by claimants in person and in conditions of informality.
“It is not, therefore, to be expected that precise and detailed proof of every item of loss will be presented, although, after making due allowance for the skills of the persons presenting the claims, the statutory requirement for informality of procedure and the undesirability of burdening the parties with the expense of adducing evidence of an elaboration which is disproportionate to the sums in issue, the burden of proof lies squarely upon the complainant.”
Even though the wording of our legislation on this issue is different from the corresponding British legislation, it is submitted that the claim for unfair dismissal under the Employment Rights Act 2012 will not permit a claim for non-financial losses to be made except in those cases where there is a breach by the employer which is automatically unfair under Section 30(1) (c) of the Act, in which case the maximum compensation is 52 weeks wages.
In those cases, the Tribunal can award such compensation as it thinks fit having regard to the circumstances of the case.
• Cecil McCarthy is a Queen’s Counsel.


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