Employment Alert No. 82- Damages For Non-Economic Loss In Unfair Dismissal Cases
February 13, 2004
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Introduction |
In Employment Alert Number 66, issued on 19 June 2003, we reported that the Employment Appeal Tribunal had, in the case of Dunnachie v Kingston Upon Hull City Council decided that the recovery of non-economic loss in claims of unfair dismissal was not permissible.
However, that decision was appealed to the Court of Appeal.
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What has the Court of Appeal decided? |
That the established understanding that damages for unfair dismissal may only be based on the economic loss suffered by the dismissed employee is wrong. Tribunals may award such damages as they consider “just and equitable in all the circumstances”. This may include damages for injury to feelings brought about by the manner of an unfair dismissal.
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What does this mean for employers? |
This decision will affect employers (i) defending claims of unfair or constructive dismissal at Tribunal; and (ii) when negotiating the settlement of potential unfair or constructive dismissal claims. Employees will try to argue that the manner in which they were dismissed caused them distress, humiliation, damage to reputation etc. A Tribunal, following the Court of Appeal’s decision, would now have jurisdiction to consider medical evidence in order to put a value on that pain and suffering. Therefore, employees and their lawyers will seek to negotiate up the price of settlement. However, unfair dismissal compensation is still limited by statute – currently to £55,000 and this element is not additional to that.
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How much will be rewarded? |
The Court of Appeal approved the use of a scale of damages, identified by another Court of Appeal, for use in discrimination cases. This scale sets out bands of compensation for injury to feelings (as distinct from compensation for actual personal injury).
Top band: £15,000 - £25,000 in the most serious cases.
Middle band: £5,000 - £15,000 in cases which are serious, but not the most serious.
Low band: £500 - £5,000 in less serious cases.
Here, Mr Dunnachie had suffered a prolonged campaign of harassment and undermining by an irrational line manager before resigning and claiming constructive dismissal. Mr Dunnachie did not suffer from a psychiatric condition, but was reduced to a state of despair. His award of £10,000 for injury to feelings was approved by the Court of Appeal.
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What should employers do? |
The biggest danger area for employers would appear to be where an employee resigns as a result of a course of conduct by the employer. The employee will argue that he/she has been constructively unfairly dismissed. The behaviour complained about may have been ongoing for some time and may have caused the employee distress. Indeed, if he/she resigned as a result, that is likely to be the case. An award of damages for injury to feelings may result.
The situation will be different where the employer knowingly dismisses. The Court of Appeal stated that it had decided that injury to feelings awards may be made as a result of the manner of the dismissal – not the mere fact of dismissal. Therefore, the employer can seek to avoid creating a liability by the manner in which it dismisses employees.
It is to be hoped that this means that if an employer follows a fair and proper procedure prior to dismissal, the mere fact that the employee is unhappy at having been dismissed will not, in itself, trigger an injury to feelings award (although Applicants’ solicitors will, no doubt, argue otherwise).
However, employers, on occasion, elect not to spend management time (either at all or in adequate quantities) in following a fair and proper procedure and knowingly unfairly dismiss an employee with a view to negotiating agreed terms of settlement.
Therefore, employers should:
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ensure that allegations of bullying or other detrimental treatment are dealt with promptly and investigated thoroughly in order to avoid allegations of constructive dismissal;
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ensure that when considering disciplinary matters, a fair and reasonable procedure is followed; and
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ensure that line managers are aware that instant dismissal may now cost more than previously to resolve.
