Mr Dunnachie resigned and obtained a new position without a break in his employment. He brought a claim for unfair dismissal on the basis that he had been constructively dismissed, in that his employer's conduct amounted to a repudiation of his contract of employment, and included a claim for £10,000 for damage to family life arising from the fact that in his new job he had less time with his young family. The employment tribunal allowed this claim, commenting that the award was reasonable if not modest in the circumstances.
The employment appeal tribunal allowed the appeal, on the basis that "loss" recoverable for unfair dismissal under section 123(1) of the Employment Rights Act 1996 could only refer to (limited) economic loss.
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The employment appeal tribunal affirmed what had been the practice of employment tribunals since their inception in the early 1970s only to compensate economic loss suffered by an employee as a result of unfair dismissal. This approach had been called into question in a comment by Lord Hoffmann in a House of Lords case – Johnson vs Unisys Ltd (2001) – in which their Lordships disallowed an employee's breach of contract claim for which he sought damages for the impact his dismissal had had on his life and health since they were not prepared to imply the necessary term into his contract of employment, taking the view that his claim fell within the scope of the statutory unfair dismissal legislation. Lord Hoffmann had said that to limit the interpretation of "loss" to "financial loss" in the context of this legislation was too narrow a construction, and that he saw no reason why in an appropriate case just and equitable compensation for loss should not include compensation for distress, humiliation, damage to reputation in the community or to family life. The employment appeal tribunal rejected this view on the basis that it was an obiter dictum and criticised the first instance tribunal for not considering causation sufficiently and explaining how the sum they awarded had been arrived at. The EAT also expressed the view that the terms of the statute meant that employment tribunals were not bound to award an applicant full compensation where it could only be shown that the employer's action "materially contributed" to the employee's loss, so it would appear that for the time being at least, employers can rest easy in the knowledge that any compensation of this kind will be small and difficult, if not impossible, to obtain for employees. The employment appeal tribunal did however send out an invitation to parliament to change and enlarge the jurisdiction of employment tribunals and remove the statutory cap upon compensation for unfair dismissal, so that this type of claim could be properly considered. Permission to appeal to the Court of Appeal has also been granted, so Lord Hoffmann's views may yet be affirmed, but even if a right in principle to recover non-economic loss is upheld by the higher courts, the practical difficulties for the employee in showing that the loss he is claiming is attributable to action taken by his employer will remain significant.