Unfair dismissal compensation and redundancy

If a tribunal concludes that an employee would have been dismissed even if the employer had consulted properly, a tribunal is likely to reduce the amount of any compensation awarded. This is known as a “Polkey” reduction (Polkey v AE Dayton Services [1987] IRLR 503).

For example, if a tribunal decides that fair consultation would have taken four weeks, but that at the end of the consultation period, the employee would almost certainly have been dismissed anyway, the likely compensatory award will be limited to just four weeks’ wages, to reflect the additional wages the employee would have earned if the employer had engaged in proper consultation.

But where an employee can produce persuasive evidence that, had consultation been effective, the employee may not have been made redundant at all, there is the prospect of much larger compensation, based on the net lost earnings of the employee for as long as they could reasonably be expected to take to find another job, taking into account the prevailing economic climate. The compensatory award for unfair dismissal is subject to a statutory cap (the lower of £74,200 or 52 weeks’ pay (2013-14)) but employees only rarely achieve compensation anywhere close to this figure.

Where the redundancy is discriminatory on grounds of whistleblowing, or for carrying out health and safety activities, compensation is uncapped.

Employees, once dismissed, have an obligation to take reasonable steps to mitigate their losses, usually by looking for another job. Claimants should keep a careful record and copies of job adverts, applications, and interviews.

If an employer produces credible evidence that the employee would have lost his or her job anyway in a later round of redundancies, this can reduce the compensation awarded (see Eversheds Legal Services Limited v de Belin [2011] UKEAT0352).

An employee who refuses to take part in consultation risks having any compensatory award reduced (Campbell v Dunoon Cowal Housing Association [1993] IRLR 496).

The Acas Code of Practice on Discipline and Grievance 2009 (which provides for increases in compensation of up to 25% for unreasonable failure to follow the Code) does not apply to dismissals due to redundancy. Acas has produced separate guides to redundancy dismissals, available from its website (www.acas.org.uk)