Paying the price when it all goes wrong

Q If I am found to have unfairly dismissed a member of staff, what is the most it could cost me?

A Regardless of whether the employee has suffered financial loss, you will have to pay a basic award which is in almost all cases the equivalent to a statutory redundancy payment – so it is dependent on their length of service, age and pay. The cap on a week’s pay went up to £270 on 1 February 2004, so the maximum basic award is now £8,100.

The compensatory award reflects actual (and mostly financial) loss suffered by the employee, caused by the unfairness of the dismissal. For dismissals that take place after 1 February 2004, the maximum award is £55,000. The cap does not apply in whistleblowing or health and safety cases. More than 98 per cent of awards made in 2002-3 fell well below the cap that was then applicable.

Q So are you saying that if I unfairly dismiss someone really badly, but then they walk into another job on the same pay the next day, they get no compensation?

A Close, but not quite. They will of course get a basic award. The tribunal will also award them a nominal sum (normally in the region of £200) for loss of statutory rights – to reflect that it will take them a year to build up enough service to claim unfair dismissal (and other service-related entitlements) in their new position. The Court of Appeal has just confirmed that staff may also be entitled to claim damages for injury to feelings. This may be the subject of a further appeal.

Q I heard that employees can also obtain an order to ‘make’ the employer take them back. Is that true?

A Yes, they can. An order for reinstatement means the tribunal is saying the employee should be given their old job back. An order for re-engagement means the tribunal is requiring the employee to be taken back, but into a different position.

But don’t panic. Out of 9,456 cases proceeding to hearings in 2002-3, only 16 concluded with an order for reinstatement or re-engagement. That’s just 0.2 per cent. Even if such an order is made, if the employer refuses to comply with the award, all that happens is that a further award of compensation is made.

Q How does it work with discrimination cases?

A There is no entitlement to a basic award in discrimination cases. On the other hand, there is no cap on compensation at all. In addition, injury to feelings awards are routine in discrimination cases. If an employee suffers an unforeseeable and very adverse reaction to the discrimination, an employer is liable to compensate the employee for that in full.

Q How does a tribunal put a monetary value on injury to feelings?

A In discrimination cases, there are three bands. Awards in the most serious cases, such as where there has been a lengthy campaign of discriminatory harassment, are normally between £15,000 and £25,000. Only in the most exceptional case will an award of compensation for injury to feelings exceed £25,000. A middle band of between £5,000 and £15,000 is used in serious cases, which do not merit an award in the highest band.

Awards of between £500 and £5,000 are appropriate for less serious cases, such as where the act of discrimination is an isolated or one-off occurrence, but awards of less than £500 are to be avoided altogether, as they risk being regarded as too low to be a proper recognition of injury to feelings. The tribunals will probably develop a similar approach in unfair dismissal cases.

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