There is a new reality facing many employers following the ruling in Dunnachie v Kingston upon Hull City Council, which held that staff can now claim for non-financial loss in unfair dismissal cases.
Q What did the court decide?
A Since 1971, compensation for unfair dismissal has been determined by what an employment tribunal considers to be just and equitable for the loss suffered by the complainant. The 1972 case of Norton Tool Co. v Tewson held that the word ‘loss’ covered only financial loss. But the Court of Appeal has now held that Norton Tool was wrong, and compensation for unfair dismissal also covers non-pecuniary loss.
Q What is the significance of this decision?
A Complainants who have been unfairly dismissed can now claim for a wide range of non-financial losses including distress, humiliation, damage to family life and psychiatric damage caused by the manner of the dismissal.
Q What impact will the decision have in practice?
A It will undoubtedly result in higher awards in unfair dismissal cases where the complainant is able to establish that they have suffered non-financial loss. However, it will also result in many complainants seeking compensation for such losses.
In turn, this will result in more complicated claims, often requiring expert medical evidence to be produced regarding the complainant’s physical or mental suffering. Such claims will inevitably take longer to reach a conclusion, and be more expensive to resist.
Q Which employers are at risk?
A It was recognised in Dunnachie that claims for non-financial loss will principally arise in cases of constructive dismissal where the ex-employee cites the employer’s behaviour as the decisive factor in the termination of the employment. In principle, an employer is at risk in any circumstances where a complainant claims to have suffered as a result of the circumstances of the dismissal.
Q How much will be awarded?
A The Court of Appeal in Dunnachie referred to Vento v Chief Constable of West Yorkshire Police for guidance on the calculation of non-financial loss. This case established three bands depending on the severity of the employee’s treatment, and the injury suffered as a result. They are:
– £500 to £5,000 for less serious incidents
– £5,000 to £15,000 for serious cases that do not merit an award in the top band
– £15,000 to £25,000 for the most serious cases.
But employers should note: Vento does not rule out an award of more than £25,000 in very exceptional circumstances.
Q What can I do to prevent this?
– Ensure there is a clear and effective policy for dealing with issues such as bullying and harassment. Updated guides on are now available from Acas
– If an employee makes an allegation of bullying or harassment, give careful consideration to the way in which it is addressed, taking advice where appropriate
– Provide managers with ongoing training so that they can recognise and deal properly with problem situations
– Monitor relationships between staff at all levels. Indications of discontentment among staff could lead to more costly problems in the future
– Ensure that HR is involved in any situation where an employee may argue at a later date that the employer’s treatment of them has caused a loss or injury.
Q Is this the last word?
A Probably not. The Dunnachie case has now been referred to the House of Lords. It is worthy to note that one of the three judges in the Court of Appeal disagreed with the majority decision.
They expressed concern about the massive practical problems that a change in what has been established law for 30 years could create. Whether this view will prevail in the House of Lords remains to be seen.