Employment Update: Unfair dismissal compensation

06 March 2007

When a dismissal is proved to have been unfair, the employee is entitled to a compensatory award of such amount as the tribunal considers ‘just and equitable’ in all the circumstances. This can include losses already incurred and future loss flowing directly from the dismissal – usually loss of earnings. Tribunals have to exercise discretion in estimating what future losses might be and to what extent they can be attributed directly to the unfair dismissal.

In the recent case of Scope v Thornett, the tribunal had tried to estimate future loss of earnings where it considered it likely that the employee would have been made redundant and/or left her employment because of continuing bad feeling within six months in any event. Could the tribunal indulge in this type of guesswork to limit the amount of compensation it awarded? The Court of Appeal said it could but it must give its reasons to show how it has reached its conclusions. The exercise is inevitably speculative but if the evidence is there, the tribunal may use it.

Points to note –

  • The evidence in this case was that the employer was under six months notice to quit the work premises and the employee had already indicated an unwillingness to relocate. This is the kind of hard evidence that must be put before a tribunal if it is to consider limiting compensation in this way.

  • Limiting compensation for loss of future earnings to a fixed period to take account of events that might happen in the future is a different exercise from making a Polkey deduction –that is to say, the deduction from compensation that a tribunal may make if it considers that, if there had been a fair process, the dismissal would have been fair.