Calculating compensation for unfair dismissal: Software 2000 Limited v Andrews and others (EAT/0533/06)

Four employees brought unfair dismissal claims in respect of their redundancies. Their complaints mainly related to defects in the selection process, including incorrectly identified selection pools and unduly subjective selection criteria, inconsistently applied.

While the tribunal agreed that the pooling and selection criteria were imperfect, it found that these defects did not themselves make the dismissals unfair. However, it was highly critical of the employer’s failure to provide appropriate guidance to the assessing managers as to how to score employees against the criteria. This, combined with subjective criteria, meant that the dismissals were unfair.

The employer argued that the same individuals would have been selected for redundancy even if a more correct process had been applied.

If that were the case, it argued, provided that the three-stage statutory procedure had been followed, the finding of unfairness should be reversed, since the dismissal of these employees was inevitable.

The tribunal was not persuaded. The selection process was fundamentally flawed so as to make it impossible to predict who would have been selected under a fair process. The tribunal fixed the compensatory award on that basis. The employer appealed against the measure of compensation.


The Employment Appeal Tribunal (EAT) found that the tribunal should have considered separately the likelihood that these employees would have been dismissed in any event under a fair process and whether a percentage reduction to any compensatory award would therefore be appropriate (following Polkey v AE Dayton Services Limited 1987).

The EAT sent the case back to the tribunal to consider what would have happened had the procedure been fair and the extent, if any, to which the compensatory award should be reduced. The EAT said the tribunal could reach one of four conclusions:

  • The employee was more likely than not to have been dismissed. In this case, statute provides that the dismissal is not unfair (section 98A(2) Employment Rights Act 1996).

  • There was a less than 50% chance that the employee would have been dismissed anyway, with compensation reduced on a percentage basis.

  • The employee would have been dismissed at some time in the future. Compensation should be limited to that period of time.

  • Employment would have continued indefinitely. A tribunal should only reach this conclusion where the absence of reliable evidence prevents it from making a realistic prediction.

Key implications

This case gives useful guidance on whether a dismissal is unfair if the employee would have been dismissed in any event if a fair process had been followed, and compensation due. This issue has been unclear since section 98A(2) was introduced in 2004. The EAT also confirmed that, with rare exceptions, the evidence presented to a tribunal should be enough for it to make a sensible prediction.

By Hayley Robinson, solicitor, Macfarlanes


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