Legal opinion: Tribunal awards need rethink

The recent award of £2.8 million to ex-bank worker Balbinder Chagger for race discrimination highlights what could be a worrying trend for employers.

Yet nothing, in terms of how awards are calculated, has changed and that could be part of the problem.

With discrimination claims, there are often a number of claims, although they will usually include unfair dismissal and an injury to feelings award.

Case law has established that compensation for discrimination is based on the tortious measure of damage. This means compensation should be calculated to produce an award that equates to putting the individual back into the position they would have been in had the unlawful discrimination not taken place.

There’s no cap on discrimination awards generally although since the Vento case in 2003 there is guidance (known as the Vento bands) on awards for injury to feelings ranging from £500 for less serious cases to £30,000 for the most serious ones, although higher awards can be made. How well has this worked?

The Vento bands have worked and have enabled us to advise clients on their potential exposure or award that could be made.

However, what the Chagger case highlights is that this is only one piece in the jigsaw. The total discrimination award can be significantly higher depending on the future loss of earnings.

Chagger, who’d earned £100,000 a year for four years at Abbey before redundancy, argued his loss of earnings should be based on the tortious measure of damage.

Abbey’s argument highlights some of the issues at stake. Its counsel argued that any award should take into account the likelihood that Chagger’s employment would have ended lawfully in any event, and that he had been unsuccessful in securing new employment because he had voluntarily disclosed to potential employers he was pursuing a discrimination claim. In other words, he had failed to mitigate his loss and, therefore, any award should reflect this.

Yet the Employment Appeal Tribunal (EAT) was not persuaded by those arguments. It ruled that Abbey had failed to show that it would have dismissed Chagger lawfully and that he had acted reasonably in telling prospective employers about the claim.

This is fundamentally where the issue lies. Each case is dependent on its facts, but tribunals appear to be determining future loss without fully taking into account the society and culture we now live in. There is no guarantee of job security nowadays and the job-for-life approach to work has changed dramatically in recent years. It is, therefore, understandable that there is a growing concern among employers at the level of awards being made and that the multi-million pound awards are the subject of ridicule.

Is it time to revisit how the future loss of earnings element is assessed as part of the compensation? The answer is yes, if only to provide reassurance that the current approach – subject to some tweaking – works or to consider if there are any alternative approaches that would work better.

It is difficult to see how a one-size-fits-all guidance approach could be a viable alternative to apply to all cases. However, more guidance on how to approach future losses, reflecting the changes in society’s approach to job security would help.

As Abbey is appealing, the court may have the opportunity to revisit this and provide some useful guidance to instill confidence in the process of assessing compensation.

Key points

  • The multi-million pound awards in compensation in recent discrimination cases have become the subject of ridicule.

  •  Discrimination awards are uncapped although the Vento bands provide guidance on the level of injury to feelings awards.

  •  Future loss of earnings can be very significant based on the current approach, but it may not properly reflect society’s changing approach to work and job security. 

  •  The Abbey appeal may clear muddy waters.

Comments are closed.