UK: Unfair Dismissal – Compensatory Awards
Authors: Ruth Bonino, Corinna Harris and Sophie Jackson
In a successful unfair dismissal claim, the tribunal makes a compensatory award it considers ‘just and equitable’, subject to a cap at the lower of 52 weeks’ pay or the statutory cap which was £74,200 at the time of this claim (from April 2022 the cap stands at £93,878). The legislation states that the cap applies after taking into account any payment made by the employer to the employee in respect of the subject matter of the claim, and any reduction in the award required by law.
When Ms Dafiaghor-Olomu’s unfair dismissal claim was successful, her employer CIC paid the compensation award of £46,000 that was made at the remedies hearing. However, when the award was increased to £129,00 on appeal, the £46,000 was deducted from the overall award before the statutory cap was applied – so CIC wasn’t given credit for that payment.
The EAT had to decide whether:
- CIC’s payment of £46,000 should be deducted from £129,000 before the statutory cap is applied, meaning £74,200 would be payable, or
- CIC should be given credit for the £46,000 payment after the statutory cap is applied (£74,200 – £46,000), so the balance of £28,000 would be payable.
The EAT found that, given the wording in the legislation, the statutory cap should be applied after the £46,000 is deducted from the total compensation sum – so CIC ended up paying £46,000 plus £74,200, instead of £74,200.
Key Action Points for Human Resources and In-house Counsel
In light of this decision, employers will be minded not to make a tribunal award payment until the compensatory order is final. Although payment under a tribunal judgment or order must be made within 14 days, and the employee may bring enforcement proceedings if the payment isn’t made, it’s possible to seek a stay of those proceedings while an appeal is in progress.
