EAT rules on dismissal compensation
Vince-Cain, a regional manager whose salary was £32,000, was dismissed by her employer. A tribunal upheld her complaints of unfair dismissal and sex discrimination, awarding her £94,781 for loss of earnings, including £4,973 for pension loss. She also received £15,000 for injury to feelings. The employer appealed.
The Employment Appeals Tribunal (EAT) held that the tribunal was entitled to make an award for injury to feelings without dealing with the question of taxation. A number of factors (including the fact that no mention was made of taxing such awards in the Court of Appeal’s Vento decision, and that damages for “pain and suffering, disability and loss of amenity” in personal injury cases are not subject to tax) pointed towards the conclusion that such an award does not attract tax. In any event, where it is unclear whether tax is payable on an award, the problem can be resolved by the employer giving an indemnity in the employee’s favour.
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The tribunal had not been wrong to calculate loss based on the period from dismissal until Vince-Cain graduated from her four-year university course, which she undertook as part of her re-training. Her decision to retrain (rather than seek new employment straight away) had been reasonable, and she had therefore fulfilled her duty to mitigate her loss.
Finally, the period of loss in this case was likely to extend beyond two years, and therefore with regard to the amount awarded for loss of her pension rights, applying the guidance in the EAT’s booklet Compensation for Loss of Pension Rights, the ‘substantial loss’ formula rather than the ‘simplified’ approach was appropriate. The matter was remitted to the tribunal for reconsideration.
