Question: A few months ago we dismissed John, an employee with three years’ service, and he brought a claim for unfair dismissal. Although we tried negotiating with him through ACAS, we were unable to agree a settlement – so we are going to the Employment Tribunal to defend the claim. We have recently found out that John started a new job not long after we dismissed him (although he is earning much less than when he worked for us). If he wins his case, we believe he will be looking to claim for the difference between what he is earning in his new job and what he would have earned if we hadn’t dismissed him.
We know that John is very well qualified (we paid for his training!) and capable of earning a lot more than he is currently. We have seen job adverts locally for roles similar to the one he did for us and on similar wages to what we were paying him, so we don’t understand why he didn’t go for one of those jobs. If John’s claim succeeds, are we going to have to pay him for his loss of earnings when it seems he could have got a higher paid job almost straight away and with little effort?
Answer: If John wins his unfair dismissal claim then one element of the compensation he will be entitled to is a compensatory award. The amount of this award is determined by what the Tribunal considers “just and equitable in all the circumstances having regard to the loss sustained by the complainant in consequence of the dismissal insofar as that loss is attributable to action taken by the employer“. John will be able to claim for loss of earnings from the date of his dismissal to the date of the Tribunal hearing (credit will be given for any pay in lieu of notice he received), and for his future loss of earnings to the extent that the Tribunal considers just and equitable. The amount of the compensatory award will be subject to the statutory cap.
Employees who bring claims like John’s are expected to take steps to mitigate their losses, such as applying for other jobs or applying for state benefits.
The recent Employment Appeal Tribunal (EAT) case of Cooper Contracting v Lindsey set out some of the key principles relating to mitigation of loss.
The Cooper case concerned Mr Lindsey who worked for Cooper Contracting as a carpenter. Mr Lindsey’s contract was terminated and he then chose to work as a self-employed tradesman (something he had done before working for Cooper) even though he could have earned more working as an employee. The Tribunal found that Mr Lindsey had been unfairly dismissed and, when considering compensation, found that it was reasonable for him to have gone back to working as a self-employed tradesman. The Tribunal made an award for Mr Lindsey’s past losses, however the Tribunal found that it was just and equitable to limit his award for future losses to 3 months’ to reflect his decision to be his own boss despite the employment opportunities in the labour market.
Cooper appealed to the EAT, not against the finding that Mr Lindsey had been unfairly dismissed, but on the grounds that the Tribunal had erred in its approach to mitigation and its calculation of Mr Lindsey’s losses.
The EAT dismissed Cooper’s appeal and set out the key principles, which when applied to your situation would mean that:
- John does not have to take all reasonable steps to mitigate his losses;
- John does not have to prove that he mitigated his loss or that what he did was reasonable – you have to prove that he acted unreasonably in failing to mitigate;
- There is a difference between acting reasonably and not acting unreasonably;
- It is for the Tribunal to decide what is reasonable and what is not, although John’s views and wishes will be taken into account;
- If you do not put forward evidence that John has failed to mitigate then the Tribunal is not under an obligation to make that finding.
If you would like to talk through a situation you are dealing with, or if you need advice on any aspect of employment law, please contact any member of the Pure Employment Law team (01243 836840 or [email protected]).