Reducing the remedy: How an employer can turn a loss into a win at an employment tribunal
Employers often ask if they’re going to win a claim. Even if a tribunal finds that an employee has been unfairly dismissed, if the amount they award the employee is less than you were willing to pay, that might be a win. The employment team at Freeths explain the ways you can reduce the remedy.
These can reduce the amount of compensation by up to 100%. Dennis Polkey was one of four van drivers, three of whom were made redundant without consultation. The House of Lords in his case established the principle that a tribunal can adjust a compensatory award for unfair dismissal to reflect what would have happened had a fair procedure been followed. In this case, for example, if three quarters of the van drivers would still have been made redundant even with a fair consultation process, you can argue that the compensatory award should be reduced by 75%. Similarly, if you can show that the employee would have been dismissed for another reason a short time after their unfair dismissal, then compensation can be reduced to the period between the unfair dismissal and when the fair dismissal would have happened. Polkey reductions only relate to the compensatory award so the employee would still be entitled to a basic award if unfairly dismissed.
Where a claimant’s conduct contributed to their dismissal, the tribunal can reduce the amount of compensation by up to 100% of both the basic award and compensatory award. To reduce the basic award, you have to show that the claimant’s conduct before dismissal makes it just and equitable to reduce their compensation. Their conduct doesn’t need to have contributed to their dismissal and you didn’t have to know about the conduct at the time. To reduce the compensatory award, you have to show that the dismissal was to some extent caused by the employee’s conduct or that their action contributed to their dismissal.
The employment tribunal has a mandatory duty to consider contributory conduct if it finds that the employee contributed to their dismissal, so plead this in your response to the claim. It can also help reduce a claimant’s expectations in settlement discussions.
Failure to mitigate losses
The dismissed employee has a duty to try and find another job. If you want to argue for a reduction in the compensatory award, the burden of proof is on you: you could argue that they didn’t make sufficient efforts to find a new role, perhaps their search was too narrow in terms of type of role or location; or they unreasonably declined a job offer either from another organisation or yours, for example, turning down employment in a “fire and rehire” situation.
Deal with this at a really early stage of a tribunal claim. Carry out online job searches so you can show the jobs and salaries on offer. If you feel that your ex-employee hasn’t done enough to try and find another role, set that out in a witness statement.
ACAS code of practice
If an employee unreasonably fails to follow the ACAS code of practice on disciplinary and grievance procedures, their compensation can be reduced by up to 25%. The most common failure is an employee not appealing against dismissal. They need a good reason not to appeal – for example, in a small business where the person who dismissed them is the same person that they would appeal to.
Just and equitable reduction
Employers can argue that there is good reason why the employee shouldn’t be unjustly enriched by an award, for example, they’ve been barred from the profession or convicted of a relevant crime after their dismissal.
Reinstatement and reengagement
Although these remedies are rare, whenever there’s a finding of unfair dismissal the judge has to ask the claimant if they’re interested, so be prepared. Reinstatement is where the employee is slotted back into the same job. Reengagement is where the employee is reemployed in a different job with the same employer, for example in large employers like the NHS where the same jobs are carried out on multiple sites. This may be an appealing remedy if the employee has a defined benefits pension, as the limit on unfair dismissal compensation may not adequately compensate for their pension losses.
The content of this page is a summary of the law in force at the date of publication and is not exhaustive, nor does it contain definitive advice. Specialist legal advice should be sought in relation to any queries that may arise.
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