Tagged: compensation

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Don’t double dip

Often, when drafting a schedule of loss, you will need to include more than one claim. For example, if your case is for unfair dismissal and unlawful deduction of wages, your schedule should set how how much compensation you want for both claims.

But you must avoid seeking double recovery. This is when you try to claim the same compensation twice under two claims.

The most common cause of this is unfair dismissal and wrongful dismissal claims. Under the unfair dismissal, you will claim compensation for your lost salary from the dismissal. Under the wrongful dismissal claim, you will claim the notice pay you didn’t get.

Say you were dismissed on 1st February, were unemployed for two months before finding a new job earning the same money and were entitled to four week’s notice. Your compensatory award will be the salary you would have got in February and March. Your wrongful dismissal claim is for four weeks salary from the 1st February.

You will see that the notice pay is for the same period as part of the compensatory award. So there is double recovery. If the tribunal were to award both amounts, you would actually be better off, financially, than if you hadn’t been dismissed. Instead of just having your February and March salaries, you’d have those plus four weeks pay.

How do you deal with this in your schedule? Don’t just take the notice pay claim out. It is still part of your claim, and the tribunal will want to know what you’re claiming under it. But you should indicate that you are aware of the double recovery rule and not trying to claim the amount twice. Simply writing something like ‘Claimed in the alternative, since this sum also forms part of the compensatory award’ is normally the best route.

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Grossing up and the statutory cap

In Hardie Grant London Limited v Aspden, the EAT has made it clear (if it wasn’t already) that the statutory limit on the amount of compensation that can be recovered for unfair dismissal must be applied after, not before, any ‘grossing up’ calculation has been done. As usual, I’m indebted to Daniel Barnett for his email alert on this case.

Grossing up is the calculation that you do to work out what you need to receive so that, after tax, the part of your award that you get to keep properly compensates you for your net losses. If your claim for lost earnings amounts to less than £30,000, you don’t have to worry about it: you won’t have to pay tax on it anyway. But if you are claiming more than £30,000 in lost earnings, although the tribunal will award you your net losses, the amount by which your award exceeds £30,000 will still be liable to be taxed as income.

It’s not really difficult to calculate how much more you need to be paid in order to be left with the right amount after tax – but it is quite fiddly, and will depend in part on your income for the relevant year from other sources. If anyone knows of a set of good, clear step-by-step instructions for this calculation (or better still, an online calculator that asks you for the relevant information and then spits out the answer), please comment.

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Do you have to pay back compensation for lost earnings if you get a job?

Someone recently found us by searching this question.

The answer is no – you don’t have to volunteer to repay it, anyway. A tribunal award is basically a guess about what the future will hold. You must tell the truth at the hearing about your prospects. But if you win compensation on the assumption that you’ll be out of work for another 6 months, and then the week after the hearing you land a new job that’s better paid than the old, that’s just your good luck.

But don’t crow about it to your old employer. It’s just conceivable that they might apply to the tribunal to review the remedy decision on the basis that there’s new evidence available that should change the award. They’d probably fail, but best not to risk it.

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Rights, remedies, and jurisdiction

Having a right, for example the right not to be unfairly dismissed, or to have reasonable adjustments made to your disability, is one thing. But on its own, it is not worth much.

The best way of explaining why is a worked example:

s94 of the Employment Rights Act 1996 creates the right not to be unfairly dismissed. It does this simply enough, by saying in effect ‘An employee must not be unfairly dismissed by his employer.’ This right is then explained and detailed in the rest of the ERA.

But on its own, this really doesn’t do anything. You may have a right, but what happens if it is breached? What, in other words, is your remedy?

This is set out in some of the later sections of the ERA, s112-126. These set out the basic and compensatory awards – as well as the various re-employment orders that might be made

So this far, you have both a right and a remedy. But even this isn’t enough. You need a way of getting your remedy. Otherwise your employer could say “Yes, you should not have been unfairly dismissed, and I should pay you compensation – but what are you going to do about it?”

The answer, of course, is that you are going to go to an employment tribunal. But if you are to do so, the tribunal must have jurisdiction. That is to say, it must have the legal power to deal with your claim. That’s set out in s111 ERA, which tells us ‘A complaint may be presented to an employment tribunal against an employer by any person that he was unfairly dismissed by the employer.’ Without s111, the tribunal wouldn’t be able to hear any unfair dismissal claims. And because it says that unfair dismissal claims will be heard by the employment tribunal, they cannot be dealt with by another court. If you tried to bring an unfair dismissal claim in a County Court, it would be rejected, because the County Court does not have jurisdiction.

All this is important, because there are traps for the unwary. You must not assume that, just because you have a right, you are entitled to compensation in a particular way or that you will be able to bring a claim to the tribunal.

For example, the Working Time Regulations 1998 contain a right that you will not have to work more than 48 hours a week (unless you agree in writing to opt-out) and that night workers do not have to work more than eight hours at a time. But there is no entitlement to compensation if these rights are breached and you cannot bring a claim to the employment tribunal about them. They are enforced by the Health and Safety Executive, and various other Government agencies.

For each claim you bring to the tribunal you must have some idea of what compensation can be awarded, and where the tribunal’s jurisdiction comes from. Otherwise you may be caught out: at best, you’ll have have wasted your time, and at worst you may have missed the chance to bring your claim in the correct forum, or risk an order that you pay the other side’s costs.

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Employment tribunal statistics: headlines

Claimants in person

The number of individuals representing themselves in the employment tribunals has remained fairly constant over the last 3 years: 30,195 in 05/06; 31,694 in 06/07 and 31,780 in 07/08

Maximum and median awards

The median award for unfair dismissal was £4,000; the medians for race, sex and disability discrimination were £8,120; £5,200 and £8,363 respectively. The highest award for unfair dismissal (including basic award) was £76,536; and the highest for race, sex and disability discrimination were £68,991, £131,466 and £227,208.

Costs

The costs figures are badly explained in the published statistics, but costs seem to have been awarded against claimants in 327 cases (out of a total of 189,303: that is, in 0.17% of cases) and against employers in 134 cases. The median award was £1,000, and the maximum was £17,775.

These figures would seem to exclude those – very rare – cases in which costs in excess of the limit of £10,000 are sought, and the costs question sent to the county court for assessment.

Appeals

There were 671 appeals to the Employment Appeal Tribunal, of which 303 were dismissed at either a full or a preliminary hearing 235 were allowed (in full or in part) and 133 were withdrawn.

These numbers do not include those that were dismissed on the papers under rule 3(7) and either not taken to an oral hearing, or dismissed at an oral hearing under rule 3(10).

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How much will I get if I win?

This is one of the key questions you will want to know the answer to before you start employment tribunal proceedings; and having a reasonably realistic view of the value of your claim is essential if you are to negotiate sensibly, too.

The answer depends on the type of claim and a whole host of other specific circumstances, but it’s possible to give a few general pointers. In most cases, the idea will be to compensate you for what you’ve lost by reason of the unlawful conduct that forms the basis of your claim. There are exceptions, but they tend to involve fairly small sums. If your employment has ended, your main argument will be about lost earnings. If your claim is for discrimination, you will be making a claim for injury to feelings as well: most awards fall somewhere in the range £5,000 – £15,000, and awards over £25,000 are rare. If discrimination has caused significant injury to your health, you will be looking for an award for that, too: your starting point in assessing this is probably the Judicial Studies Board’s Guidelines for the Assessment of General Damages in Personal Injury Cases (9th ed, OUP £21.99)

In any case where you are claiming lost earnings because you have lost your job, you will be under a duty to ‘mitigate’ your loss. What that means is that just because you’ve been dismissed, however unfair (or discriminatory) the dismissal, you can’t expect to sit back and claim lost earnings for the rest of your career. You are expected to try to find another job. If there are good reasons why you can’t, or why any job you are likely to get will be for a much lower wage than you were earning before, you’ll need to be able to explain. (See ‘Mitigation‘) It is fairly rare that tribunals award compensation to cover more than a year or two’s lost earnings – and a few months is more usual. For the kinds of circumstances that might persuade them to look at a longer period, see ‘Push your luck,’ and ‘The mummy track.’

There’s a limit, currently £66,200, on what you can recover as compensation for most types of unfair dismissal – but most awards get nowhere near that limit. There’s no limit in theory to what you can get for discrimination or for a whistle-blowing dismissal, but that doesn’t mean that awards have to be huge. In 2006/2007 (2007/2008 figures are not yet available), the median award for unfair dismissal was £3,800; and the medians for race, sex and disability discrimination cases were about £7,000, £6,700 and £8,200 respectively.

In particular, don’t let newspaper reports of awards in the hundreds of thousands, or even milllions, give you the wrong idea. Tribunals do occasionally make very large awards – and those, of course, are the ones that hit the headlines – but they are rare. The best way of getting a huge award is to have an extremely well-paid job to start with: if you’re being paid in the hundreds of thousands every year, then you’ll clock up large losses in a short period out of work. People earning normal salaries will only get large awards if they can show that they are likely to suffer a very long period of future loss. That – because of the duty to mitigate – is usually difficult.

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New employment tribunal limits

As of today (that is to say, for the purposes of employment ending today or later), the maximum award of compensation for unfair dismissal is £66,200, up from £63,000; and the maximum amount of a ‘week’s pay’ for the calculation of statutory redundancy pay and various other awards is £350, up from £330.

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Vento and inflation

If you’re claiming compensation for injury to feelings in a discrimination case, you’ll need to read the judgment of the Court of Appeal in Vento for guidance on what kind of sum you can sensibly claim. But bear in mind that Vento was decided in 2002, so don’t forget to adjust for the effect of inflation. The Bank of England provides a helpful inflation calculator.

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Announcing the result

Most awards of compensation made by the employment tribunals are of fairly modest amounts that are unlikely attract any tax: the sum of money that the tribunal orders the employer to pay is the sum of money the claimant ends up with.

However, awards can attract tax at up to 40% and, in some cases, can also be subject to national insurance. In such cases, it is necessary to take the effect of tax into account in calculating the schedule of loss; this is the calculation known as ‘grossing up.

If you are the claimant and you have done this calculation, you will probably remember when you get the tribunal’s judgment that the sum awarded is larger than it would otherwise be because you are going to have to pay a substantial amount of tax. But if you are an adviser acting for a client, don’t assume that they have understood the grossing up calculation or remembered what you told them about tax on any award the tribunal might make. At least on first sight, they are likely to read the judgment saying that their former employer has to pay them £X, and think that that means they are going to end up with £X. It will then come as a let-down when they realise that what they’re actually going to get is £Y, substantially less than £X, because quite a lot of it is going to have to be paid to HMRC.

So when you contact your client to tell them the result of the case, tell them the news in the right order. That is to say, don’t tell them:

‘The tribunal has awarded you £X in compensation.

Instead, make sure you have done the tax calculation before getting in touch, so that you are in a position to say something like:

‘The tribunal has awarded you a sum of money that will leave you about £Y after tax.’

That way, by the time they see the judgment telling their employer to pay then £X, they will know what it means in terms of the money they will actually get.

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The ‘mummy track’

If you are bringing a claim against your employer for dismissing you, you will almost certainly be claiming compensation for lost earnings. Sometimes this will be very small – for example if you managed to find a better-paid job only a few weeks after you were dismissed. But sometimes there will be good reason to think that you have lost more than that. You may even think that the dismissal has done permanent damage to your career. You should tell the tribunal about the whole of your future loss: for more detail on this, see Push your luck.

Mothers of young children will often suffer the greatest losses. If you have lost a responsible and demanding job soon after having your first child, you may have real difficulty getting or keeping another job at the same level. This is because it is one thing winning the respect of an employer in a pressured environment as a single twenty-something who is able to work all hours, go drinking with colleagues in the evening, and be back at your desk at 7.30 am the next day. It is quite another pulling off the same trick through morning sickness, ante-natal appointments, maternity leave, unreliable child-minders, school hours, homework, childhood illnesses, and general parental knackeredness. If you have lost your job at this critical time of your life, you may find that you have been pushed onto a ‘mummy track’ that can affect the rest of your career.

The same may be true, of course (barring morning sickness), if you are the father of a young child – if you really do act, when push comes to shove, as if your child is as much your responsibility as its mother’s.