Recovery of earnings in constructive dismissals

Stuart Peters Limited v Bell


Ms E L Bell brought a successful employment tribunal claim against Stuart Peters Limited (SPL) for constructive unfair dismissal. The tribunal found that Ms Bell was entitled to a six-month contractual notice period, and that she had been dismissed without notice. The tribunal made an award of six months’ pay, less credit for money actually paid in the first week of the notice period.

During the six-month notice period, Ms Bell had in fact found three months’ temporary work with another employer. However, the tribunal declined to offset the earnings received from her temporary employment against the award in respect of the notice period. The tribunal regarded itself as bound by the decisions of the National Industrial Relations Court in Norton Tool Company Ltd v Tewson and the Court of Appeal in Langley v Burlo. SPL appealed against the tribunal’s assessment of damages.


The principle established in the Norton Tool case was that if an employee is dismissed without notice and without pay in lieu of notice, they are entitled to compensation equal to their net pay for the period of notice without deductions in respect of earnings from alternative employment during the notice period. This principle was described in Langley v Burlo as a “precept of good industrial practice”.

When assessing what is “just and equitable” in respect of unfair dismissal compensation, a tribunal should assume that the employer would act in accordance with not just its contractual duties, but also good practice, and not make a deduction for wages earned during the notice period. SPL accepted that this principle applied in straightforward unfair dismissal cases, but argued that it does not apply in constructive unfair dismissal cases. It said good industrial practice did not require an employer to make a payment in respect of a notice period where the employee has, of their own choice, brought the employment to an end. The Employment Appeal Tribunal (EAT) disagreed. There was no suggestion in either Norton Tool or Langley v Burlo that the Norton Tool principle applied only to cases of direct dismissal.

The EAT held that there was no reason why the relevant precept of good industrial practice should produce a different result in constructive unfair dismissal cases than in direct dismissal cases. The tribunal was entitled to award compensation for the notice period without deduction of earnings during that period.


This case is the first time (at least at appellate level) that the controversial Norton Tool principle – requiring recovery of unfair dismissal compensation for unpaid notice without deduction of earnings received during the notice period – has been applied to a constructive dismissal case. The application of the principle is likely to lead to double recovery by employees in cases where there is a long notice period. Even in these difficult economic times, an employee with a six- or 12-month notice period may well find some paid work during the notice period. However, as the EAT noted in this case, it would be up to the House of Lords to re-examine the principle.

Alan Chalmers, partner, DLA Piper

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