Unfair Dismissal – September 2022

Compensation

If an employee wins an unfair dismissal claim, the employment tribunal can award compensation that they consider to be ‘just and equitable’ bearing in mind the employee’s losses. In most cases, there is a statutory limit on the amount of compensation that can be awarded, currently £93,878 or 52 weeks’ pay, whichever is the lower. Section 124(5) Employment Rights Act 1996 says that the statutory cap should be applied after taking account of any payment made by the employer to the employee in respect of the claim. In Dafiaghor-Olomu v Community Integrated Care, the EAT has looked at how the statutory cap works in practice, with surprising consequences.

The employee won her unfair dismissal claim. At a first remedies hearing she was awarded around £46,000, which the employer paid. The employee appealed and her compensation was increased to almost £130,000. The question was whether the statutory cap - then £74,200 - should be applied before or after the amount already paid was deducted from the increased award. If the cap was applied first, then her award of £130,000 would reduce to £74,200 - less the £46,000 already paid, the employee would be owed around £28,000. If then cap were applied second - by deducting the £46,000 from the £130,000 and then applying the cap - she would be owed a further £74,200 on top of the sum already received. Whilst expressing sympathy for the employer, the EAT said the wording of section 124(5) meant that the cap had to be applied second.

This judgment seems very unfair. Instead of paying £74,200, the employer had to pay the initial award of around £46,000 and then another £74,200 on top, simply because of the wording of section 124(5). Had there been no appeal, and a single award of compensation, the employee would not have received this kind of double-recovery. To avoid being hit by this compensatory double-whammy, employers who are faced with an appeal on compensation should request a stay of any enforcement proceedings pending the appeal decision. This is a rare case where complying with a tribunal order would place the employer at a disadvantage. This decision may yet be appealed.

Acas uplifts

An employer should follow the Acas Code of Practice on disciplinary and grievance procedures when dealing with grievances or dismissing an employee for disciplinary reasons such as misconduct or poor performance (the Code does not apply to redundancy dismissals). If the employer unreasonably fails to follow the Acas Code, the employment tribunal can increase compensation by up to 25% if it is ‘just and equitable’ to do so. In Rentplus v Coulson, the EAT looked at whether an uplift of 25% could apply to a discriminatory dismissal that the employer had said was a redundancy dismissal.

The employee was a director and a member of the senior leadership team, working closely with the CEO. In March 2017, and without the employee’s knowledge, the employer decided to dismiss her. From October 2017, she was frozen out of her role. In 2018, a reorganisation took place which was described as a redundancy exercise despite the fact that the number of roles would increase rather than decrease. A consultation exercise took place. After this, the employee raised a grievance about the fact that her role was redundant and complained of poor treatment by the CEO. Her grievance and the appeal were dismissed. She was dismissed and brought claims for unfair dismissal and discrimination. The tribunal said her dismissal was unfair and discriminatory. The redundancy process was a total sham because the decision to dismiss had been taken months before. The tribunal awarded a 25% uplift in compensation due to ‘egregious’ breaches of the Acas Code. The employer appealed, saying the Acas Code could not apply to a redundancy dismissal (the employer’s argument) or a discriminatory dismissal (the tribunal’s finding).

The EAT said that the Acas Code applies to ‘disciplinary situations’, not just express capability and conduct processes. It could apply to a wider set of circumstances, including situations where a potential misconduct or poor performance issue is dressed up as a sham redundancy. A decision that a dismissal is discriminatory won’t stop the Code applying - perceived performance issues which stem from discriminatory assumptions will be a ‘disciplinary situation’. The EAT said the tribunal’s judgment showed that the employer dismissed the employee because they were unhappy with her either personally or with her performance - a belief which was tainted by discrimination. This created the necessary disciplinary situation and the Acas Code applied. The 25% uplift was reasonable because the dismissal process was a total sham and made in bad faith.

This case shows that ‘disciplinary’ situations may well arise in the absence of express capability and conduct processes. If an employee is disliked for some reason, due to her behaviour or the way she goes about her job, that is a disciplinary situation for the purposes of the Acas Code. It remains a disciplinary situation even if the employer then decides to invent a redundancy (or other) situation to mask the real reason for dismissal. If an employer is unhappy with an employee, for whatever reason, that should be dealt with fairly, using the appropriate conduct or capability procedure.

If you have a concern about any aspect of employment, we have a team of highly experienced and approachable employment solicitors who will assess your particular circumstances and provide you with clear practical advice on your rights and options. Speak to one of our team on 0118 978 0099, email info@cliftoningram.co.uk or complete our online contact form.