Employers should take advice before paying sums

In Dafiaghor-Olomu v Community Integrated Care UKEAT/2022/84 the Employment Appeal Tribunal has made the rather surprising decision that payments made by an employer following a finding of unfair dismissal are deducted from the statutory cap before the statutory cap is applied, even if this means that the employer gained no benefit from a £46,153.55 payment it had already made.

The facts

The Claimant won her claim for unfair dismissal but went on to appeal against the decisions of the Tribunal made at two different remedies hearings.

At the first remedies hearing, the Claimant had asked for compensation and re-engagement – the Tribunal awarded compensation of £46,153.55 but refused to order re-engagement. The Respondent paid the £46,153.55 as ordered. The Claimant appealed and her case was remitted back to the Tribunal for a second remedies hearing. At the second remedies hearing the Tribunal again refused to order re-engagement but found that the original compensatory award was insufficient in light of new evidence, increasing the total award to £128,961.59.

As the Respondent had already paid £46,153.55 the matter was again escalated to the EAT to determine whether the Tribunal should have deducted the payment of £46,153.55 from the total award of £128,961.59 before applying the statutory cap of £74,200 (the relevant cap for the time of dismissal).

The EAT held that the correct order of adjustments, as per section 124(5) Employment Rights Act 1996, meant that the statutory cap should be applied last after deducting any payments to account (i.e., payments already made by the employer as compensation for dismissal). They held this was right even though it effectively meant that the Respondent had no benefit from having already paid the £46,153.55 initially ordered i.e., because £128,961.59 less £46,153.55 was £82,808.04 meaning that the applying the statutory cap last meant that the Respondent had to pay £74,200 notwithstanding the £46,153.55 already paid.

The EAT said that it "had considerable sympathy for the respondent… In paying the award fixed by the ET after the first remedies hearing it had complied with what it perceived to be its duty. No doubt it did not foresee that, as a result of the appeal on the question of re-engagement, the tribunal would revisit the question of compensation and award a higher figure that had the effect of depriving it of the benefit of having made the payment".

We are waiting to hear if this judgment will be appealed. The bizarre outcome (whereby the Respondent has been forced to pay £46,153.55 more than the statutory cap for a claim of unfair dismissal) makes an appeal seem highly probable (on the basis that if this is the result intended by government, the award is not just and equitable, given that it seems to deride the concept of a statutory cap).

Otherwise and/or in the meantime, this decision means that we will be advising employers who having been ordered to pay compensation, having lost unfair dismissal claims, that they might want to consider withholding payment ordered by the Tribunal (incurring interest at 8% per annum) until after the time limit for appeal (42 days) has passed and they have undertakings that no appeal has been lodged, the latter being important because we are hearing of appeals taking around six months to be acknowledged.

If you have recently (or are about to) have a finding of unfair dismissal made against you, please do seek advice before paying any award in line with the Tribunal order to avoid having to potentially pay more than the statutory cap if an appeal by the Claimant is successful.