Case Update – s124(4) Employment Rights Act 1996

Outcome

In University of Huddersfield v Duxbury, the EAT confirmed that s124(4) Employment Rights Act 1996 (“ERA”) applies to remove the statutory cap on the compensatory award in an unfair dismissal claim only to the extent necessary to ensure the aggregate awards an employer is required to pay after failing to comply with a reinstatement order, are no less than the amount that would have been payable under the reinstatement order had the employer complied. Therefore, in this case, the EAT held that the employment tribunal erred in making a compensatory award for unfair dismissal in excess of the statutory limit imposed by S.124(1) ERA, which resulted in aggregated awards of £94,769.78, where the reinstatement order had required the employer to pay £67,469.78.

Facts

Duxbury was employed by the University as a senior lecturer until his dismissal in January 2020. He brought employment tribunal proceedings and succeeded with an unfair dismissal claim. At the remedy hearing, the tribunal made a reinstatement order and ordered the University to pay £67,469.78 to reflect Duxbury’s loss of pay and benefits for the period between the date of termination of employment and the date of reinstatement. The University subsequently confirmed that it would not comply with the reinstatement order.

At a further remedy hearing, the tribunal made basic, compensatory and additional awards in respect of Duxbury’s unfair dismissal. In making a compensatory award, the tribunal disapplied the statutory cap that would otherwise apply to that award – which the parties agreed would be one year’s gross pay at £63,532.81 – and instead made an award equal to the sum that would have been payable under the reinstatement order of £67,469.78. The tribunal therefore proceeded on the basis that S.124(4) applied to Duxbury’s case. The additional award, which was made on the basis that it had been practicable for the University to reinstate Duxbury, was in the sum of £27,300.

The University appealed to the EAT, arguing that the tribunal had erred in finding that S.124(4) ERA applied so as to disapply the statutory cap on the compensatory award. In other words, the compensatory award should have been capped at one year’s gross pay, i.e. £63,532.81.

Decision

The EAT allowed the appeal. It acknowledged that the tribunal had correctly recognised that, the University having failed to comply with the reinstatement order, the sums that would otherwise have been due under the reinstatement order fell to be treated as part of the compensatory award to which Duxbury was entitled. The compensatory award would normally be subject to the statutory cap however, S.124(4) makes clear that the statutory cap may be adjusted where there has been a failure to comply with an order of reinstatement and the tribunal makes a compensatory award, together with an additional award. In such cases, the tribunal is entitled to make an award above what would otherwise be the applicable statutory cap in order to ensure that the aggregate of the compensatory and additional awards reflect, at least, the amount that would have been payable had the reinstatement order been complied with.

In this case, the EAT noted that the amount of £67,469.78 that would have been due to Duxbury under the reinstatement order exceeded the statutory cap for a compensatory award. The tribunal had considered that the adjustment allowed under S.124(4) meant that the cap could be exceeded in order to ensure that the amount of the compensatory award it made fully reflected this figure. However, in the EAT’s view, the tribunal had ignored the additional award that it was also making of £27,300. Section 124(4) applies ‘to the extent necessary’ to ensure that ‘the aggregate of the compensatory and additional awards fully reflect’ the sum in the reinstatement order. The agreed statutory cap was £63,532.81, added to the additional award of £27,300, produced a total sum of £90,832.81. Given this was considerably more than the £67,469.78 identified as payable under the reinstatement order, the EAT held that it was not necessary for the statutory cap on the compensatory award to be exceeded.

The application of s124(4) operates to allow the cap to be exceeded on the compensatory award to ensure that, in some instances, it is not cheaper for the employer to decline to reinstate the employee and pay the maximum capped compensatory award, together with a basic and additional award, rather than to comply with the reinstatement order and pay the sum due under it.

Should you require any advice in relation to matters similar to the above, or otherwise, please do not hesitate to contact the Employment Team on 020 8290 0440.