This is a successful appeal by the respondent, Kingston Upon Hull City Council, from the decision of the Court of Appeal reported in Legal Briefing No.8 of 2004. The applicant had worked for the respondent local authority as an environmental health officer and had been driven from his job by a campaign of bullying by his manager. The Employment Tribunal awarded him the statutory maximum amount for a claim for unfair dismissal. Included in its assessment of the level of the compensatory award was the sum of £10,000 in respect of damage to family life. The Employment Appeal Tribunal decided that the Employment Tribunal erred in law in awarding this sum for non-economic loss. The Court of Appeal overturned that decision.
The House of Lords was asked to decide finally whether section 123(1) of the Employment Rights Act 1996 allowed for the recovery of non-economic loss.
The House of Lords disagreed with the Court of Appeal’s construction of the relevant statute which required that “the amount of the compensatory award shall be such amount as the Tribunal considers just and equitable in all the circumstances having regard to the loss sustained by the applicant in consequence of the dismissal insofar as that loss is attributable to the action taken by the employer”. They held (1) that economic loss only must be compensated for and (2) that the words “just and equitable” simply gave the tribunal a degree of flexibility having regard to the informality of the procedures (with many employees representing themselves and not having the assistance of a cost accountant or an actuary to prove their losses), and the fact that the maximum award for unfair dismissal is capped at £55,000.
For further information, call Tony Francis or Nicholas Gould on 0207 956 9354
The House of Lords became the third appellate court in this case to overturn the decision of the court below it, and finally upheld the view of the Employment Appeal Tribunal (reported in Building Legal Briefing in July 2003) that only economic loss could be recovered in an unfair dismissal claim.
The Court of Appeal had acknowledged that the natural meaning of “loss” in its context here was “economic loss”, but considered that the court only had to “have regard” to the economic loss in deciding what was just and equitable compensation in all the circumstances. The House of Lords expressed concern that this construction would allow awards of aggravated or exemplary compensation by way of penalisation of the conduct of the employer. Their Lordships considered that there was no way that Parliament had intended to allow such awards. They also agreed with the Employment Appeal Tribunal and with the dissenting judge in the Court of Appeal that the parliamentary draughtsman would have been specific about the types of loss that could have been recovered had it been the intention to allow recovery for non-economic loss.
The House of Lords noted, however, that a Royal Commission had recommended in 1968 that the remedy for unfair dismissal should include compensation for “injured feelings and reputation”, and it may yet be that Parliament has the final say on this matter in an amendment to employment legislation currently under consideration.