Commercial clients beware

Advice  |   12 July 2022

Written by
Faye Shortall, Associate Solicitor

Compensation for unfair dismissal is subject to a statutory cap being the lower of the claimant employee’s salary or, for dismissals that took place on or after 6 April 2022, the sum of £93,878.

The recent case of Dafiaghor-Olomu v Community Integrated Care raised the issue of when the statutory cap should be applied. Should it be applied before, or after, any deduction for payments already made to the employee have been applied?

The claimant in the above case was successful in her claim for unfair dismissal and the Employment Tribunal awarded the sum of £46,000 in compensation. The Respondent paid this to the employee in accordance with its duties. On appeal, at a second remedies hearing, the EAT re-assessed the compensation awarded and determined that the initial sum of compensation had been too low and increased this to £129,000.

The sum awarded at the second remedies hearing was subject to the statutory cap (£74,200 at the time). The Respondent argued that the further sum payable to the employee was the cap minus the £46,000 that had already been paid. The EAT, however, determined that the sum of £46,000 was to be deducted from the final amount before the statutory cap was applied and, therefore, the claimant was due a further sum of £74,200.

Whilst the judge expressed sympathy for employers in this situation, it was the EATs position that it had to apply the clear wording in the Employment Rights Act 1996 and determined that the £46,000 should be deducted from £129,000, and then the statutory cap applied.

This decision means that employers should bear in mind that any payments made to an employee outside of settlement terms will be deducted before the statutory cap is applied and could therefore result in the employer paying more than the statutory cap.

Advice

If you require assistance or advice on the content of this article, please contact the Employment Team at Thackray Williams LLP 020 8290 0440.

Related Insights