Calculating tribunal awards - how it's done

Implications of new ACAS guidelines

The method by which claimants’ compensation is assessed remains unchanged by the repeal of the statutory dismissal, disciplinary and grievance procedures. However, says Martin Brewer at Mills Reeve, the Employment Act 2008, which came into effect in April and replaces the statutory procedures, gives employment tribunals discretion to increase or reduce compensation awards by up to 25% where the employer or employee has unreasonably failed to comply with the new Acas Code of Practice.

He said: “An example of an employer acting unreasonably would be if they dismissed an employee without sending them a letter or inviting them to a hearing.”

In addition, Brewer says an employee who refuses to attend a disciplinary hearing because they are signed off sick could be, save for the most extreme circumstances, seen as acting unreasonably.

He added: “It is common in disciplinary or performance management cases for an employee to go off sick with stress. But a doctor’s certificate only gives them time off work – it doesn’t absolve their responsibility to their employer.

“Where a person is physically and mentally capable of attending a disciplinary hearing they should attend. The belief that employees are untouchable when they are signed off sick is a myth.”

High-profile tribunal cases where large compensation awards are involved make for good headlines.

For example, news of last year’s record-breaking £19m damages award to City lawyer Gill Switalski was splashed all over the national newspapers after a tribunal found she had suffered sex discrimination and harassment. It is being contested.Likewise, a tribunal’s decision last autumn to award bank worker Balbinder Chagger £2.8m compensation for suffering racial discrimination made many a headline.

But just how do employment tribunal panels decide on these amounts, and what criteria do they use when awarding damages to claimants?

By far the most common tribunal claim is for unfair dismissal.According to provisional figures from the Tribunals Service for April 2008 to February 2009, of the 131, 365 claims accepted at employment tribunals, more than a third (47,115) were for unfair dismissal.

And in these cases, employment law specialists say, tribunal panels take a scientific approach when assessing compensation awards to successful claimants.

Two halves

There are two elements to unfair dismissal awards – a basic award, and a compensatory award. The basic award is calculated in the same way as statutory redundancy pay using multiples of a week’s pay, and according to a formula which takes into account years of service and the age of the claimant. A week’s pay is capped at £350, while compensation can be given for up to a maximum of 20 years’ service.

In addition, a compensatory award may be awarded to a successful claimant in an unfair dismissal case to compensate them for financial loss suffered as a result of their dismissal “in so far as that loss is attributable to action taken by the employer”.

The amount of financial loss, such as wages and pension rights, is calculated from the date of the dismissal to the tribunal hearing and can also take into account potential on-going losses, where for example the claimant has been unable to find a job or has had to take a position that pays less than their previous role. The amount a tribunal panel can award in these cases is capped at £66,200.

According to Robert Thomas, a partner in the employment team at law firm Speechly Bircham, it is unusual for tribunal panels to compensate claimants beyond a year of their dismissal as “they tend to think this is a reasonable time in which people can find a new job.”But as the economic downturn bites and there are fewer job vacancies, David Latham, president of the Employment Tribunals, says the fact that there are “less opportunities out there is likely to be taken into account” when it comes to compensatory awards.

Big bucks

However, the big compensation awards that make the headlines tend to come from cases where there has been a claim for discrimination. This is because there is no cap on the amount a claimant can be awarded in discrimination cases. In such cases there is also an additional award for injury to feelings.

This is not based on a calculation offinancial loss, but on how hurt the claimant’s feelings have been.

“This is a very subjective area as one person may get more upset over a particular incident that another,” says Martin Brewer, an employment partner at law firm Mills and Reeve.

“I’ve had to cross-examine people to find out how upset they were, and it is an impossible thing to quantify. The point is, how justified were they in becoming upset?”

Awards for injury to feelings are generally considered in three bands known as the Vento guidelines after decisions made in a case where a female constable, Angela Vento, was awarded £257,844 in compensation for sex discrimination and harassment by superiors at West Yorkshire Police.The Vento guidelines are the benchmark against which injury to feelings awards are assessed and cover a range of discrimination claims including sex, race and disability.

The top band should normally be between £15,000 and £25,000. Sums in this range should be awarded in the most serious cases, such as where there has been a lengthy campaign of discriminatory harassment. The middle band of between £5,000 and £15,000 should be used for serious cases which do not merit an award in the highest band. The lowest band encapsulates awards of between £500 and £5,000 – amounts deemed appropriate for less serious cases, such as where the act of discrimination is an isolated or one-off occurrence.

According to Thomas, there have been amounts awarded beyond what is recommended in the Vento guidelines in cases where the discrimination was deemed to have been carried out “with malice and bad intentions.”

Remedy hearing

How much compensation an employer should pay a claimant is decided at a separate hearing to the original tribunal. Called the remedy hearing, it is an opportunity for the claimant to show evidence of loss and for the respondent (ie,the employer or the employer’s representative) to produce mitigating evidence.

The claimant will be cross-examined and must provide a schedule setting out what is being claimed.

Thomas says, if possible, respondents attending a remedy hearing should come armed with a “sheath of job adverts” as evidence to support an argument that a claimant should have got a job or got one sooner.

Brewer’s advice to employers is that, in most instances, if they lose the case, they should settle with the claimant before going to remedy “rather than put themselves through the cost of another hearing in the hands of a tribunal which has already found against them”.

Appeals against a compensation award are “extremely rare” he says, because it is only possible to appeal on a point of law, or if the decision is seen to be legally perverse. And, as we have seen, with discrimination cases especially, what a claimant deserves by way of compensation is a subjective matter.”An employment tribunal’s jurisdiction is to award compensation that it considers ‘just and equitable’ so they have a lot of latitude,” Brewer added.

Legal detail

It becomes clear when talking to lawyers about the finer legal details of how employment tribunals reach resolution that brinkmanship and bluff-calling have a part to play. Nowhere is this more apparent than in the high-profile cases – details of which seem to appear on the front page of the newspapers with increasing regularity. Many of these cases emanate from the City where people generally earn large sums and are, therefore, pursuing big pay-outs. But Brewer suspects many claimants in these cases are inflating their claims or going public with their situation in an effort to force their former employers to settle at higher level.

He added: “Many employers will settle if a case goes public because they don’t want the adverse publicity. But such a move can be counter-productive for the claimant as the employer may decide that because the case is now in the public arena, they must be seen to fight it.”

“I’ve had to cross-examine people to find out how upset they were, and it is an impossible thing to quantify”

What an employer can do

There are things an employer can do that might help to mitigate their position and potentially reduce any compensation they may have to pay. Mills Reeve’s Martin Brewer suggests in some circumstances the employer should write to the claimant expressing how sorry they are that the situation has come to this.

“As long as the letter falls short of an admission of guilt, it will show the employer genuinely regrets the turn of events,” he said.

There is also nothing to stop the employer from offering the claimant their job back or a position in another part of the organisation. This move, says Brewer, is most common in cases of constructive dismissal, and will help to mitigate against charges the claimant has struggled to find work, as well as “put the claimant on the back foot.”