Compensation for financial loss
An employment tribunal may award compensation for the claimant's financial loss flowing from (and therefore caused by) an act of direct or indirect discrimination, harassment or victimisation (although special provisions apply with regard to indirect discrimination: see Indirect discrimination). In common with the previous discrimination legislation, the Equality Act 2010 provides that the aim of an award of compensation is the same as an award of damages in tort (such as a personal injury action). This is, so far as is possible by a monetary award, to put the claimant in the position in which he or she would have been had the unlawful discrimination, harassment or victimisation not occurred.
In non-promotion or non-appointment cases, evidence will be required as to the sums that would have been earned if the claimant had been promoted or appointed. Other factors that need to be taken into account include the claimant's chances of being offered the job if the discrimination had not occurred, the length of time that he or she would have stayed in that job, the length of time it will take to find other employment and earnings from such employment.
In dismissal cases, evidence will be required as to the loss of earnings from the post. This will include all types of remuneration including basic pay, regular bonus payments, tips, pay increases and expenses. In addition it will involve the calculation of compensation for loss of fringe benefits such as a company car, rights under an occupational pension scheme, accommodation, private health cover, life insurance and preferential mortgage schemes.
Although there are similarities with the calculation of an award for unfair dismissal, there is no limit on the amount of compensation that can be awarded in a discrimination claim. In Michalak v Mid Yorkshire Hospitals NHS Trust ET/1810815/08 (decided under the repealed Sex Discrimination Act 1975 and repealed Race Relations Act 1976), the employment tribunal awarded over £168,000 for past loss of earnings, almost £942,000 for future loss of earnings, and over £666,000 in pension losses to a former NHS hospital consultant who was unlikely ever to practise medicine again as a result of chronic post-traumatic stress disorder sustained in consequence of the race and sex discrimination that she had suffered. The employee also recovered damages for various other matters including over £43,000 for the cost of past and future care for her young son and £50,000 for the cost of medical treatment. Her total award, including interest and injury to feelings, amounted to nearly £4.5 million after grossing up for tax.
In Brash-Hall v Getty Images Ltd [2006] EWCA Civ 531 CA (decided under the now repealed Sex Discrimination Act 1975), the Court of Appeal held that compensation for discrimination must be assessed to put the claimant into the position in which he or she would have been if the respondent had not acted unlawfully. In Chagger v Abbey National plc and another [2009] EWCA Civ 1202 CA (decided under the now repealed Race Relations Act 1976), the Court of Appeal held that the employment tribunal should have considered whether or not Mr Chagger would have been made redundant even if the employer had not been motivated to select him for redundancy on the ground of his race. This question is analogous to the "Polkey question" that arises in unfair dismissal cases (Polkey v AE Dayton Services Ltd (formerly Edmund Walker (Holdings) Ltd) [1987] IRLR 503 HL).
In calculating future losses, ie from the date of the employment tribunal hearing, consideration needs to be given to the future period that the claimant is likely to be unemployed or the likelihood of continuing losses due to a decrease in wages.
In making an assessment, the local job market and factors concerning the individual, such as age and skills, will be taken into account. In Chagger v Abbey National plc and another [2009] EWCA Civ 1202 CA (decided under the now repealed Race Relations Act 1976), the Court of Appeal restored the employment tribunal's decision that "stigma damages" reflecting the risk that future potential employers might decline to employ Mr Chagger because of his race discrimination proceedings against Abbey National could be included in the award of compensation made against the latter.
In cases where the claimant has found other work but it is lower paid, account will be taken of whether or not the new job has potential for promotion and how long it is likely that he or she will remain on worse terms and conditions having regard to the job market. In Wardle v Crédit Agricole Corporate and Investment Bank [2011] IRLR 604 CA, the employment tribunal found that Mr Wardle, who had been denied promotion because of his race and subsequently unfairly dismissed and victimised, had a 70% chance of returning to an equivalent job in banking by the end of 2011, having meanwhile secured a lower-paid job with the Financial Services Authority (FSA). In these circumstances, the Court of Appeal held that the tribunal had been wrong to award any compensation beyond the end of 2011, and in theory the cut-off date might have been earlier, once Mr Wardle had a more than 50% chance of regaining equivalent employment. On the facts, the Court of Appeal held that it was "reasonable to conclude that the claimant would probably have been able to leave the FSA and obtain an equivalent job by the end of June 2011".
Where a claimant is nearing retirement it is possible that losses will be assessed up to retirement age on the basis that he or she is unlikely to be able to find further work.
Where a claimant is disabled this may also be a factor to be taken into account when assessing how long it will take him or her to find alternative employment.
In Sheffield Forgemasters International Ltd v Fox; Telindus Ltd v Brading [2009] IRLR 192 EAT (decided under the now repealed Disability Discrimination Act 1995), the Employment Appeal Tribunal (EAT) held that (subject to the rule against double recovery) receipt of incapacity benefit did not of itself preclude an award of compensation for loss of earnings during the same period. The mere fact that someone is deemed "incapable of work" for the purposes of incapacity benefit does not mean that he or she is in fact unable to work.
The unfair dismissal of an employee following an act of unlawful discrimination does not break the chain of causation if loss of earnings was caused by the act of discrimination. Loss of earnings can still be assessed as part of compensation for unlawful discrimination, rather than as compensation for unfair dismissal, to which the statutory cap on compensation would apply: HM Prison Service v Beart (No.2) [2005] IRLR 568 CA (decided under the now repealed Disability Discrimination Act 1995).
Pension loss can be significant and some guidance is provided by a booklet prepared by a committee of employment tribunal chairs: Compensation for loss of pension rights: employment tribunals, third edition (on the Ministry of Justice website). It distinguishes between a "simplified approach", which is recommended for cases where loss is comparatively small, and a "substantial loss approach" where there is longer-term career loss. The EAT has produced guidance on how to calculate loss: Greenhof v Barnsley Metropolitan Borough Council [2006] IRLR 98 EAT (decided under the now repealed Disability Discrimination Act 1995). In Sibbit v The Governing Body of St Cuthbert's Catholic Primary School EAT/0070/10 (an unfair dismissal case relevant to discrimination cases with regard to pension loss), the EAT held that the claimant's loss was plain on the objective material and that, in applying the simplified approach, the employment tribunal had chosen a method that would not remedy that loss. The EAT applied the substantial loss approach and substituted a figure of £9,797 for pension loss for the figure of £5,427 awarded by the tribunal.
In Browne v Central Manchester University Hospitals NHS Trust ET/2407264/07; ET/2405865/08; and ET/2408501/08 (a race discrimination case decided under the now repealed Race Relations Act 1976), the employment tribunal, applying the "substantial loss" approach, awarded over £244,000 in pension loss to a former senior employee who had been with the NHS for over 34 years. The employee's total (grossed up) award including past and future loss of earnings, injury to feelings, personal injury and aggravated damages came to over £900,000.
In Gardner v Chief Constable of West Midlands Police EAT/0502/11, the EAT expressed the view, obiter, that a tribunal may depart from the substantial or simplified approach set out in Compensation for loss of pension rights: employment tribunals, third edition (PDF format, 500K) (on the Ministry of Justice website), or the "Ogden" approach (which is used in other civil cases), where it has cogent, intelligible and appropriate reasons for doing so. The tribunal must state what those reasons are. The EAT does not recommend such an approach unless "it is plain that the interests of justice require it".
In Aegon UK Corporate Services Ltd v Roberts EAT/0278/08 (another unfair dismissal case with implications for discrimination cases), after being unfairly dismissed by her employer, Ms Roberts found another (better paid) job, but she lost her final salary pension because her new employer operated a money purchase scheme. The EAT held that the employment tribunal was correct to hold that the less favourable pension arrangements constituted a continuing pension loss beyond the date of any loss of earnings claim, and it was also entitled to differentiate between a final salary pension scheme and a money purchase scheme. However, the Court of Appeal overturned the EAT decision, stating that pension loss does not have special status when calculating an employee's losses and the tribunal was wrong to apply different principles of causation to different aspects of the employee's remuneration package (Aegon UK Corp Services Ltd v Roberts [2009] IRLR 1042 CA).
In Rank Nemo (DMS) Ltd and others v Coutinho [2009] IRLR 672 CA (decided under the now repealed Race Relations Act 1976), the Court of Appeal held that the non-payment of a tribunal award to a former employee may constitute victimisation, and remitted the case to the same employment tribunal. The Court of Appeal stated that, in principle, if victimisation were established, the claimant should be able to recover both the original tribunal award and compensation for any loss of benefit or detriment suffered in consequence of the victimisation. Any award of compensation would be subject to the rule against double recovery.
In London Borough of Hackney v Sivanandan and others [2011] IRLR 740 EAT, the EAT held that, where there are multiple respondents and particular loss cannot be attributed to one party, employment tribunals must award compensation on a joint and several liability basis, meaning that the claimant can claim the entire amount from any respondent. It is only where there is a rational basis to differentiate between the loss caused by each respondent that a tribunal has the power to apportion compensation between them. The Court of Appeal upheld the EAT decision (London Borough of Hackney v Sivanandan and others [2013] IRLR 408 CA). If, in the case of jointly and severally liable respondents, only one is called upon to satisfy the award in full it is possible for it to seek a contribution from one or more of the other respondents by means of the Civil Liability (Contribution) Act 1978. A similar approach was endorsed by the EAT in Bungay and others v Saini and others EAT/0331/10 (decided under the repealed Employment Equality (Religion or Belief) Regulations 2003 (SI 2003/1660)) in which the tribunal had found that Mr Bungay and Mr Paul (one of the other appellants) had been "the prime movers in the campaign of discriminatory behaviour" against the employees. However, in Sunderland City Council v (1) Brennan and others (2) GMB (3) Unison EAT/0288/11, the EAT expressed the view, obiter, that the Civil Liability (Contribution) Act 1978 "is concerned only with claims justiciable in the ordinary courts" and has no application to claims pursued in the employment tribunal. The EAT went on to hold that an employment tribunal has no jurisdiction to entertain a claim for a contribution under the Civil Liability (Contribution) Act 1978 in any event. The practical effect of Sivanandan is illustrated by Catanzano v (1) Studio London Ltd (in administration) (2) McMillan (3) Ward EAT/0487/11 in which the EAT held that the employment tribunal should have made all three respondents jointly and severally liable for an award of £3,000 for injury to feelings (although, on the facts, a 25% uplift for procedural failures was the responsibility of the employer alone). Given the facts, the tribunal should also have awarded compensation for loss of earnings under the heading of sex discrimination, with the result that all three respondents were jointly and severally liable. In awarding such loss only under the heading of unlawful deductions from wages and declining to make a loss of earnings award in the sex discrimination claim, the tribunal had deprived the employee of an award against the second and third respondents (subject to the usual principle against double recovery). This was of practical importance because the employer was in administration and lacked both funds and insurance in respect of the employee's claims.
In Olayemi v Athena Medical Centre and another EAT/0140/15, the employment tribunal held that the employee's previous episode of post-traumatic stress disorder (PTSD), which was related to abusive behaviour by her neighbours at the time, "contributed to the causation" of the subsequent episode that she experienced because of the respondents' conduct. The tribunal reduced the employee's compensation (with the exception of the injury to feelings component) by 12.5% to reflect this. The EAT allowed the employee's appeal. There was evidence that the employee was "vulnerable or predisposed to suffer from PTSD by virtue of the earlier episode" but this did not justify the tribunal's "blanket reduction" in compensation. It noted that if the employer had not harassed the employee "some other trigger would have been required to cause her to relapse into illness". The EAT remitted the issue to the tribunal to "consider whether and if so why it can really be said that there was some independent material cause of the [second] episode in 2008, or whether in reality the [employee] was merely vulnerable to harassment".
Net losses
Account should be taken of payments from other sources received by the claimant when assessing the compensatory award. These will include payments made at termination of the employment and any subsequent payments that the claimant has received from any new employment. If the claimant has become self-employed the profits from the business will also be taken into account.
The claimant will be under a duty to take reasonable steps to mitigate his or her losses. If evidence is produced that the claimant could have reduced his or her losses by obtaining suitable alternative employment then the compensation may be decreased to take this into account. In Debique v Ministry of Defence EAT/0075/11, a serving soldier left the army as a result of sex and race discrimination. At the remedies hearing the employment tribunal held that she had unreasonably refused the Ministry of Defence's (MoD) offer of a posting that would, it found, have adequately addressed the childcare difficulties that had led to her claim. The MoD made the offer during the soldier's one-year notice period. The Employment Appeal Tribunal (EAT) upheld the tribunal's refusal to award compensation for loss of earnings or loss of congenial employment.
In Cooper Contracting Ltd v Lindsey EAT/0184/15 (an unfair dismissal case that is also relevant to cases of discrimination), the EAT warned against "an approach that suggests that the duty to mitigate is a duty to take all reasonable steps to lessen the loss". The EAT summarised the principles on the duty to mitigate losses (as set out in various appellate decisions) as follows:
• The burden of proof is on the respondent ("the wrongdoer"); claimants do not have to prove that they have mitigated their loss.
• If the wrongdoer fails to present evidence as to mitigation before the employment tribunal, the tribunal has no obligation to find such evidence.
• The claimant does not have to show that what he or she did was reasonable; "what has to be proved is that the claimant acted unreasonably (Banco De Portugal v Waterlow & Sons Ltd [1932] AC 452; Wilding v British Telecommunications plc [2002] IRLR 524 CA; Ministry of Defence v Mutton [1996] ICR 590)".
• "There is a difference between acting reasonably and not acting unreasonably (Wilding v British Telecommunications plc [2002] IRLR 524 CA)."
• The question of what is reasonable or unreasonable is a matter of fact.
• "It is the tribunal's assessment of reasonableness and not the claimant's that counts."
• Employment tribunals should not apply "too demanding a standard to the victim". The claimant "is not to be put on trial as if the losses were his fault when the central cause is the act of the wrongdoer (Banco De Portugal v Waterlow & Sons Ltd [1932] AC 452; Fyfe v Scientific Furnishings Ltd [1989] ICR 648; Wilding v British Telecommunications plc [2002] IRLR 524 CA".
• In summary, the correct test is "for the wrongdoer to show that the claimant acted unreasonably in failing to mitigate".
• The fact that it may be reasonable for a claimant to have taken on a higher paid job does not necessarily satisfy the test. While this would be important evidence that may help the tribunal to conclude that the employee has acted unreasonably, "it is not in itself sufficient".
The Employment Protection (Recoupment of Job Seeker's Allowance and Income Support) Regulations 1996 (SI 1996/2349), which apply to compensation awards for unfair dismissal, do not apply to awards of compensation in discrimination cases, even where the claimant has been dismissed and the calculation is similar to a compensatory award for unfair dismissal. The employment tribunal, in order to avoid double recovery, will take into account the benefits received by the claimant when assessing the compensation. In Sheffield Forgemasters International Ltd v Fox; Telindus Ltd v Brading [2009] IRLR 192 EAT (decided under the now repealed Disability Discrimination Act 1995), the EAT held that (subject to the rule against double recovery) receipt of incapacity benefit did not of itself preclude an award of compensation for loss of earnings during the same period. The mere fact that someone is deemed "incapable of work" for the purposes of incapacity benefit does not mean that he or she is in fact unable to work.