Remedies for unfair dismissal – reinstatement for the big win?

If a claimant wins a claim for unfair dismissal, the possible remedies that a tribunal can award are as follows:

1. An order for reinstatement or re-engagement.
2. Compensation (a basic award and a compensatory award, which is subjected to a statutory cap).

What are reinstatement and re-engagement?

Reinstatement is an order requiring the employer to treat the employee in all respects as if they had never been dismissed. They must be re-employed on the same terms with no loss of pay, pension rights or continuity of employment and enjoying other pay rises or additional benefits that would have been awarded to them had they not been dismissed.

Re-engagement is an order requiring the employer (or an associated employer) to re-engage the employee in a role which is comparable to the role from which they were dismissed, on terms which are, so far as reasonably practicable, as favourable as if the employee had been reinstated.

Importantly, reinstatement or re-engagement orders usually also require the employer to make up all of the employee's lost salary and benefits for the period between dismissal and reinstatement/re-engagement.  This lost salary sum is not subject to any cap, and the time between dismissal and the reinstatement or re-engagement order may well now be years-long given the backlogs in tribunals.  

If an order for reinstatement or re-engagement is made and the employer refuses to comply, in addition to an obligation to make up lost salary and to ordinary unfair dismissal compensation, the tribunal will order an additional award (of between 26 and 52 weeks' pay subject to statutory limits on a week's pay) as a penalty.

What will a tribunal consider in deciding whether to make an order for reinstatement or re-engagement?

The tribunal is obliged to explain reinstatement and re-engagement as options to a successful claimant and ask whether they would like such an order to be made (even if they have not indicated this on their claim form).

If the employee does wish for reinstatement or re-engagement to be considered, the tribunal must then consider:

1. Whether reinstatement or re-engagement is practicable for the employer (or associated employer for re-engagement).
2. Whether the employee caused or contributed to the dismissal and, if so, whether it would be just to make an order for reinstatement or re-engagement.

Practicable means that it must be capable of being carried into effect with success. Factors that are relevant include:

• Whether the employer has hired a permanent replacement. This can be relevant to practicability where the business needed someone to cover the dismissed employee's work and a reasonable period of time passed without the dismissed employee asking to be reinstated or re-engaged.
• Whether trust and confidence has irretrievably broken down.

What do most claimants ask for?

Compensation. Orders for reinstatement or re-engagement are extremely rare, reportedly being made in less than 1% of cases.

Most employees ask for compensation because the statutory cap on the compensatory award (the lower of 52 weeks' gross pay or £93,878 (from 6 April 2022)) is usually more attractive to most average earners than the prospect of being reinstated or re-engaged by the employer they have just litigated against. In a good market too, a claimant might well be able to find another job more quickly than a tribunal estimated, leaving the compensation ordered as a form of financial bonus for an unfairly dismissed claimant.

Higher earners though, may well be tempted to seek reinstatement or re-engagement because the statutory cap does not apply to lost salary awards. They may also be more inclined to pursue this remedy where they have genuinely found it difficult to obtain alternative employment at an appropriate level of earnings.

A good, if unusual, example of this played out recently in Jones v JP Morgan Securities plc. In this case the bank was ordered to re-engage a trader that it had unfairly dismissed and to make up lost salary and benefits of £1.5 million covering the period between dismissal and re-engagement. The bank had dismissed the trader (unfairly the tribunal determined) for alleged market manipulation which had taken place some years beforehand, after a new policy against this kind of behaviour was introduced by the bank in response to changes indicated by the financial regulator. The introduction of this policy caused the bank to reopen a historic investigation into the trader which had previously determined no disciplinary sanction was appropriate. The bank had made it plain that it felt obligated to provide an adverse regulatory reference for the trader notwithstanding the finding of unfair dismissal. This meant that the trader would not be able to find alternative employment in the UK (because the adverse regulatory reference would always prevent him from securing a regulated role). For this reason, the tribunal ordered the bank to re-engage the trade at an associated employer based in Hong Kong, determining that re-engagement in this way was the only way in which the claimant's unfair dismissal could be properly remedied.

Key takeaways

Whist it is true that most claimants do not want to return to work for the employer who unfairly dismissed them, nor perhaps wait the significant period of time that would be needed to gain such an order following a successful liability hearing in the tribunal, employers should be cautious of the attraction of reinstatement or re-engagement orders to some claimants (particularly higher earners who would consider the statutory cap on compensation to be unattractive).