Unfair Dismissal: Damage and Deductions

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In claims for unfair dismissal brought before the Employment Tribunal, awards of damages made to successful claimants generally fall into two categories – a basic award and a compensatory award. The basic award is calculated by reference to a specific formula which is based on the employee’s level of pay, age and number of complete years’ service at the date of their dismissal.

The compensatory award, as the name suggests, compensates the employee for any financial loss arising from their dismissal and includes elements such as past and future loss of earnings.

Both the basic and compensatory awards are subject to a statutory cap, meaning there is a maximum amount that an employee claiming unfair dismissal can recover.

In addition to the statutory cap both the basic and compensatory award can be subject to potential deductions. Specifically in relation to a compensatory award a Tribunal has the power to apply what is known as a Polkey deduction, the name being a reference to the case in which the deduction was first applied: Polkey v A. E. Dayton Services Limited 1988.

A Polkey discount is applied when the Employment Tribunal forms the view that an employee was unfairly dismissed, but that any compensatory award they are to receive is to be reduced or deducted to reflect that whilst the procedure followed leading to the employee’s dismissal may have been unfair, the end result would have been the same even if a fair procedure had been followed. The Tribunal has the power to reduce the compensatory award by anything from 1% to 100% of its full value.

A recent example of this was seen in the Employment Appeal Tribunal case of BT v Condorrat War Memorial and Social Club and others. In this case the claimant had received a final written warning from her employer before then acting insubordinate and refusing direct instructions from her employer. At a hearing the Employment Tribunal held that the claimant had been unfairly dismissed due to the employer’s failure to follow proper procedure. However, the Tribunal reduced the claimant’s compensatory award by 100% (i.e. to 0) on the basis that regardless of the employer’s failure to follow proper procedure it was inevitable that the claimant’s actions would lead to her dismissal.

Our experienced employment law team can advise and assist both claimants and respondents in connection with any employment law matter. To speak to a member of our team please contact our Head Office at Bishop Auckland on 01388 604691.

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