Compensation - Case Round-Up: September 2016

In this month's round-up, Mark Shulman, consultant solicitor with Keystone Law, looks at recent decisions on compensation in both unfair dismissal and sex discrimination cases.

[Mark Shulman, Consultant Solicitor at Keystone Law
Unfair dismissal – ACAS uplift
What is the correct order of calculations for an ACAS uplift when there are concurrent claims of unfair dismissal and wrongful dismissal? The EAT has considered this issue in [Shifferaw v Hudson Music Co Ltd]() UKEAT/0294/15/DA.

The Claimant successfully claimed both wrongful and unfair dismissal. The ET calculated the wrongful dismissal damages first and then the unfair dismissal compensatory award from the end of the wrongful dismissal damages period. They then applied an uplift of 20% to the unfair dismissal compensatory award for the Respondent's unreasonable failure to comply with the ACAS Code of Practice on Disciplinary and Grievance Procedures.

An alternative approach would have been to calculate the unfair dismissal compensatory award for the entire period, then apply the uplift and finally deduct the wrongful dismissal damages to avoid double counting. The second approach would have been more favourable to the Claimant because had there been no wrongful dismissal claim, the compensatory award for unfair dismissal would have given an additional two months' pay to which the ET would then have applied the ACAS uplift.

The Claimant appealed against the method of calculation used by the ET.

Order of deductions
The EAT concluded that ETs have a choice as to how to proceed in a case where there are concurrent wrongful and unfair dismissal claims and are not bound by Digital Equipment Co Ltd v Clements (No.2) [1997] ICR 237 (which concerns the order of deductions for sums paid by the employer as compensation for dismissal). Which basis to apply will be a matter for the ET's discretion in a particular case.

The EAT could see that the course adopted by the ET in the present case may have given rise to unintended consequences in terms of the ACAS uplift. It was unclear whether the ET intended to apply the uplift only to the unfair dismissal award in respect of the period of loss arising after the end of the notice period. It did not appear expressly to have considered the point, although the Claimant's Schedule of Loss assumed the uplift would be applied to the entire period of loss.

In the circumstances, the EAT allowed the appeal on this ground and remitted the point to the ET to specifically address the question whether it intended the ACAS uplift to be limited to the unfair dismissal compensation only in respect of the Claimant's losses after the end of wrongful dismissal period. If it did not, it would be open to the ET to re-visit the approach to the calculation of the concurrent claims and its intention in respect of the uplift of the unfair dismissal compensatory award.

*In cases where there is to be compensation for concurrent unfair and wrongful dismissal cases it will be important to determine which  of the two methods described above is appropriate. As the EAT itself pointed out, the methodology used in the present case could give rise to unintended consequences,  particularly where there is a longer notice period and where the employee is able to find alternative work (so as to mitigate their losses) shortly after the notice period expires.

However, whilst the ET has a discretion, the EAT's decision does not give any guidance as to which approach might be more appropriate in particular types of cases and so a refinement of the principles may be left for future cases.*

Sex discrimination – Injury to feelings
Was an injury to feelings award of £14,000 manifestly excessive? No, said the EAT in [AA Solicitors Ltd (T/A AA Solicitors) & Anor v Majid]() UKEAT/0217/15/JOJ.

The Claimant was a legal practice course student and aspiring lawyer who sought work with the Respondents, a firm of solicitors in Bolton. The Claimant alleged that the Second Respondent (the firm's principal) had committed around 40 acts of sexual harassment against her, ranging from asking her to go out to the cinema, talking about installing a bed in one of the rooms at the office, attempting to hug her, touching her arms, squeezing and rubbing her hands when shaking hands.

The Claimant succeeded on liability against both the law firm and its principal (the Second Respondent). In its Remedy Judgment the ET made awards against both Respondents jointly and severally including compensation of £14,000 for injury to feelings (therefore falling within the middle Vento band). That award resulted from findings which were that the Claimant was a young woman at the start of her professional career and the Second Respondent was an older man in position of power and authority. The ET also noted that there was evidence of visits to the Claimant's GP resulting from stress and anxiety because of the harassment and exacerbation of an irritable bowel syndrome condition from which the Claimant suffered.

*Manifestly excessive?
*The Respondent appealed contending that the award for injury to feelings of £14,000 was "manifestly excessive" on the basis that the conduct in question was "… no more than modestly obnoxious and might properly be characterised as gauche and insinuating rather than aggressive, and was of brief duration …". Further, it was argued that awards of this kind were purely compensatory and should not be "untaxed riches". In that light, it was suggested that a reasonable person in the street would consider the award of £14,000 was excessive when set against awards in the personal injury cases. It was contended that the award should at most have been no more than £10,000.

The EAT disagreed. On the facts this was not a case merely of persistent unwanted attention without serious physical contact that was no worse than gauche and insinuating. The Second Respondent's conduct violated the Claimant's dignity as a worker. From the first meeting in the job interview, he treated her in a demeaning and disrespectful manner as a woman in the office for his pleasure and gratification rather than to work and develop her skills as a lawyer. He had at the initial job interview asked her what her star sign was and proposed marriage although he was already married. He then commented on her figure, saying she was very stocky and touched her arms, saying she had muscles. The conduct continued including inviting the Claimant to go to the cinema and mentioning putting a bed in one of the office rooms. When she politely rejected his advances, he turned nasty and she lost her job as a result.

The EAT considered that the reasonable person in the street would regard the law as deficient if it did not mark such conduct with awards that recognise how humiliating it is for a worker to lose her job because she is not willing to play a sexually charged role allotted to her by her employer.

In Vento, the Court of Appeal had said that there is "… within each band considerable flexibility, allowing tribunals to fix what is considered to be fair, reasonable and just compensation in the particular circumstances of the case". Another ET might have made a lower award within the middle Vento band (and it would not have been wrong to do so), but this was a case of an award within what the Respondents had accepted as being within the correct band. It was not suggested that this is a case where the ET had got the wrong band.

Further, the award was not at the top of the band. It was above the middle but not at the upper limit. So, whilst it could be characterised as perhaps on the high side, it was not in the EAT's view manifestly excessive so as to justify interfering with the ET's decision. The ET had the considerable advantage of having heard the evidence during the hearing that preceded the liability judgment and was therefore well placed to make its assessment and fine-tune its assessment of what the right level of award was.

Accordingly, the Respondent's appeal was dismissed.

*Future adjustments for changes in the value of money
*The EAT commented that allowing for the 10% Simmons v Castle [2012] EWCA Civ 1039 uplift,  the middle Vento band is now in the range of £6,600 at the lower end and £19,800 at the top end. The EAT stated that while consistency is highly desirable, in future cases there is no need for ETs to await guidance from the EAT or any higher court before adjusting the Vento bands to take account of inflation. If there is cogent evidence before an ET of the rate of change in the value of money (which could, in principle go down as well as up), then a reasonable ET acting on that evidence would be entitled without error of law to act on that evidence by adjusting the band ranges and any award for injury to feelings accordingly.

This case reminds us that the amount of a Vento award will generally be a matter for the ET's discretion. Therefore, it will be relatively rare for appeals to succeed in a case where it is said that the ET selected the wrong point within a band rather than selecting the wrong band. Further, the EAT commented that whilst there was an analogy with personal injury awards for psychiatric injury, in the ET's jurisdiction the Vento guidelines on awards represent bespoke guidance tailored to ET awards.*

Deductions from compensation
Compensation for sex discrimination is assessed on a tortious basis (see section 124 of the Equality Act 2010). Had an ET been right to deduct 12.5% from the Claimant's award because of a previous episode of PSTD? No, said the EAT in [Olayemi v Athena Medical Centre & Anor]() UKEAT/0140/15/LA. Further, the ET had also been wrong to deduct from the award an amount in respect of Housing Benefit.

The Claimant won her claim of sex discrimination, the ET finding that the Respondent had subjected to her to a campaign of harassment designed to intimidate, humiliate and drive her out of the medical practice where she worked. She was dismissed in August 2008 and diagnosed as suffering from PTSD. The ET awarded Dr Olayemi ("Dr O") compensation for sex discrimination comprising:

* £30,000 for injury to feelings (including £5,000 for aggravated damages);
£21,875 for (psychiatric) personal injury; * £244,963 for past losses; and * £216,923 for future losses awarded on the basis that, following the Remedy Hearing, the Claimant would undergo therapy and would be fit for part-time work after 18 months and a role equivalent to that which she held with the Respondent after 30 months.

The ET agreed to make a 12.5% deduction from her awards for past and future losses (but not the injury to feelings element of compensation). This was on the basis that Dr O had suffered a previous episode of PTSD between 1999 and 2002 consequent upon a problem with her neighbours. The jointly appointed expert consultant psychiatrist had formed the opinion that "the previous history of PTSD will have contributed to the tune of 10-15% towards the causation of the present episode".

*Divisible damage
*On appeal to the EAT, Dr O challenged the 12.5% deduction. She contended that the tortfeasor must take his victim as he finds her, rather than this being a case of dual causation where two competing causes contribute to a condition or injury. The Respondent's position was that the ET was entitled to conclude that the injury to the Claimant was divisible and therefore was only partially responsible.

After considering the relevant case authorities, the EAT explained that ETs should always take account of any existing vulnerability or any divisible cause when it awards compensation. Where there is an existing vulnerability it should make allowance for the chance that the Claimant would at some point have suffered the psychiatric condition in any event. In the case of divisible causes, it should not award compensation for any harm which occurs by reason of that other cause. Accordingly, where there is another material cause for the Claimant's psychiatric condition (going beyond mere vulnerability or susceptibility), the ET needs to identify the harm for which the Respondent is responsible and award compensation for that harm, as opposed to the harm which would have occurred in any event.

The EAT referred to the case of Dingle v Associated Newspapers Ltd [1961] QB 162 where examples were given of how the divisibility principle works in practice. So, for example, where four men acting individually (and not in concert) hit the Claimant one after another and as a result of his injuries he is detained in hospital and loses a month's wages, each wrongdoer is liable to compensate for the whole loss of earnings. However, if there were four distinct physical injuries, each man would be liable only for the consequences of the particular to the injury he inflicted.

The EAT stated that it is more likely that an injury will be held to be indivisible if the competing causes are closely related to the injury and it is difficult to separate out their consequences. Each case will depend on the evidence; the principles are the same where the injury is psychiatric but such is the complexity of the human mind that it may in practice be difficult to separate out the impact of different causes.

The 12.5% deduction
In the present case, Dr O had plainly established that the Respondent's wrongdoing was a material cause of her psychiatric condition. This being so, it was no defence to show that she would not have suffered as she did but for a susceptibility or vulnerability to that psychiatric condition. Assuming that the ET found the injury to be divisible (which was implicit rather than expressly made in its findings), it would then have had to consider how the injury was divisible. That would entail considering what in practice did the episode of PTSD in 1999-2002 cause, and what did the Respondent's unlawful conduct cause?

Even if it had carried out that exercise, the EAT did not see how the ET could have concluded that there should be a 12.5% deduction in respect of all of Dr O's losses. For a start, some of the losses were not susceptible to division at all (e.g. the cost of an advertisement for which the Respondent refused to pay). Further, it did not follow that because the earlier episode contributed to the tune of 10% to 15% to the current episode, that Dr O's past loss of earnings would necessarily have been any less; it was very unlikely that the Claimant would have been unwell in 2008 but for the Respondents' wrongdoing.

Therefore, these questions were remitted for reconsideration by the ET. It would need to consider whether, and if so why, it could really be said that there was some independent material cause of the episode in 2008, or whether in reality Dr O was merely vulnerable to harassment; and if there was some material independent cause, whether and how it was divisible. It would therefore need to take care before making any kind of across the board percentage reduction.

Deduction of Housing Benefit
Should the ET have deducted housing benefit ("HB") from the loss of earnings award in sex discrimination cases?

No, said the EAT. In principle, if benefits received by a Claimant can be recovered by the State from a subsequent award of damages for loss of earnings, those benefits ought not to be deducted from the ET's award. Although the EAT in Savage v Saxena [1998] IRLR 182 had held that housing benefit should not be deducted from unfair dismissal awards, this principle applied equally to sex discrimination cases where there are claims for loss of earnings.

This decision is a useful point of reference in terms of calculating awards for sex discrimination. But the case highlights that when instructing an expert in this type of case, care is needed to ensure that the appropriate questions are posed in line with the principles described above in terms of the separate issues of vulnerability (predisposition) and divisibility (separate causes of damage).*

*State benefits
The clarification on non-deduction of Housing Benefit in discrimination cases is also helpful.
In unfair dismissal cases, if the Claimant has received Job Seekers' Allowance or income support, the cost of those benefits can be recouped by the State under the applicable Recoupment Regulations so as to ensure that the employee does not recover compensation for the same losses twice.

But the recoupment regime applicable in unfair dismissal claims does not apply to discrimination compensation. However, the principle remains that compensation will be reduced by the amount of State benefits in order to avoid double recovery in discrimination cases.

In terms of Incapacity Benefit (now Employment and Support Allowance), a Claimant seeking compensation for future loss could be deemed "incapable of work" (but still entitled to receive incapacity benefit), even if they were capable of doing some work. The scheme under the newer Employment and Support Allowance rules still means that ETs will have to consider whether a Claimant would be able to earn income during the applicable period and is eligible for compensation for lost earnings accordingly.*

Mark Shulman is a Consultant Solicitor with Keystone Law and an accredited workplace and employment mediator. His blog on new employment legislation can be found here.

Published: 09/09/2016 15:17

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