Mark Shulman, Consultant Solicitor at Keystone Law

**UNFAIR DISMISSAL
**
Career losses
In two recent cases, the EAT considered the correct approach to assessing compensation in career loss cases. The principal issue in [UCATT v Short ]()UKEAT/0503/12/JOJ was whether it had been wrong for the ET not to use Ogden Tables (which set out multipliers which enable future annual losses (net of tax) to be calculated on the basis of various assumptions). The multipliers in the Tables allow for the effects of various factors, including future inflation, interest rates and life expectancy.

Background
The Claimant was constructively unfairly dismissed at the age of 46 as a result of anxiety and stress and was found by the ET to have suffered a career loss. His previous expectation of working for UCATT was until he was aged 65.

The Claimant was awarded compensation totalling over £390,000. Part of that sum (£195,000) was for future loss of earnings. This was calculated by applying a multiplicand of 14.67 years (not the full 19 years to retirement) to reflect the chance of earlier death and accelerated payment. The calculation also assumed an increase of 2.5% per year in the Claimant’s salary.

The ET’s findings on future loss had been:

* the Claimant was unfit for work for the foreseeable future and no-one could say for certain when he would be fit to work again. It was unlikely that he would ever be able to secure work at the same remuneration as his job with UCATT; * it would be inappropriate to award loss of earnings to age 65 (19 years): the ET factored in the possibility of earlier death and accelerated payment. The compensation calculation assumed a year on year increase in salary of 2.5%.

After calculating the future loss, the sum was reduced by 30% to cover contingencies other than mortality and accelerated payment (e.g. inability to work because of sickness; redundancy etc).

At the EAT appeal, UCATT’s contentions were that the ET:

(i) had mistakenly taken account of inflation in its judgment;
(ii) should have used the Ogden tables to calculate future loss (which would have resulted in a sum £35,000 less than the amount which was awarded).

Should account be taken of inflation?
With regard to inflation, the Union contended that the ET mistook the rate of return which is in the Ogden tables (at 2.5%), for the inclusion of a 2.5% rate of inflation. It was argued that on case authority, it was wrong to include an uplift for inflation as the calculation of future loss is based upon a multiplicand as at the date of trial and is not therefore to be increased in line with inflation (relying on Cooke v United Bristol Healthcare NHS Trust .

In the EAT’s view, it was clear from the ET’s judgment that the increase awarded year on year was not for inflation, (which would be wrong), but was for the expectation that in each of those years this trade union would have awarded its officer a 2.5% wage increase. The representations made to the ET by the parties were to do with future loss of earnings and there was no mention of inflation or to increasing the multiplicand by reference to inflation. It was accepted by counsel for both parties to the appeal that it was appropriate to make an award for future losses which took account of future increases in wages.

Use of Ogden Tables
In terms of the ET’s general approach, the Claimant contended that the proposition to be derived from the judgment of Elias LJ in  [Wardle v Credit Agricole ]()[2011] ICR 1290 CA was that it is open to a Tribunal to take the Ogden tables approach or to do what is just and equitable by another approach so long as its method is demonstrable. There was no requirement in law which said that a Tribunal would err if it does one or the other; the matter had to be considered globally.

The EAT agreed with the Claimant that the ET’s approach was permissible – there was no absolute requirement to use the Ogden Tables.

Was career long loss a real possibility?
Similar issues concerning calculation of future loss arose in [Aramark Ltd v Graham ]()UKEAT/0164/12/SM, although in that case the dispute centred on whether the Claimant would in fact have remained in employment for the remainder of her career.

Background
The Claimant, who was disabled, won her claim for constructive unfair dismissal and was awarded a basic award, past loss of earnings, future loss of earnings and injury to feelings. She was awarded compensation for future loss on the basis that she would not find work before her 65th birthday, in 2019. The Employment Tribunal assessed future loss using a 5½ year multiplier. The period from dismissal to retirement was 7½ years but the Tribunal calculated future loss as 5½ years to reflect the small possibility that the Claimant’s employment would not have lasted until retirement. This deduction amounted to a discount of 26.6%.

The Respondent appealed and argued that the ET had failed to take into account the risks that the Claimant would have been made redundant in any event (had she not been dismissed when she was), or would not have been able to cope with the Respondent’s changed working methods because of her disabilities and so the ET should have applied a lower multiplier.

In contrast to the UCATT case, there was agreement in Aramark on the correct "Ogden Table" from which the ET should choose the appropriate discount for advancement and on other matters. In Aramark, the dispute as to future loss of earnings centred upon the Respondent's contention that the Claimant would have been made redundant in any event if she had not been unfairly dismissed.

Would employment have continued?
The employer’s contention was primarily based on the fact that subsequent to the Claimant’s dismissal, the Salvation Army had taken the relevant catering services back from Aramark Ltd. A witness for the Respondent at the remedy hearing agreed in evidence that, if the Claimant had still been employed in April 2011, she would have transferred back to the employ of the Salvation Army under the TUPE regulations.

However, at that time, the Salvation Army did not carry on the catering services as they had before. Instead of cooking and preparing fresh food on the premises, under the new system what they provided to the residents was a frozen product which was delivered to the premises from outside and then heated and served. Thus, the employer argued, the need for staff to provide catering services was reduced. The employer also argued that the nature of the changes made was such that the Claimant would, if she had continued in her job, have had to handle teapots and use the dishwasher; tasks which it had been shown that she could not adequately or safely perform because of her disabilities.

On appeal to the EAT, the employer pointed to the guidance given in the judgment of the Court of Appeal in Chagger v Abbey National Plc [2010] IRLR 47 (at paragraph 57):

"It is necessary to ask what would have occurred had there been no unlawful discrimination. If there were a chance the dismissal would have occurred in any event, even had there been no discrimination, then in the normal way that must be factored into the calculation of loss."

The employer also referred to the guidance given by Elias P in the Court of Appeal decision in Software 2000 v Andrews [2007] IRLR 568 (at paragraph 54):

"The following principles emerge from these cases:

(1) In assessing compensation the task of the Tribunal is to assess the loss flowing from the dismissal, using its common sense, experience and sense of justice. In the normal case that requires it to assess for how long the employee would have been employed but for the dismissal.

(2) If the employer seeks to contend that the employee would or might have ceased to be employed in any event had fair procedures been followed, or alternatively would not have continued in employment indefinitely, it is for him to adduce any relevant evidence on which he wishes to rely. However, the Tribunal must have regard to all the evidence when making that assessment, including any evidence from the employee himself. (He might, for example, have given evidence that he had intended to retire in the near future).

(3) However, there will be circumstances where the nature of the evidence which the employer wishes to adduce, or on which he seeks to rely, is so unreliable that the tribunal may take the view that the whole exercise of seeking to reconstruct what might have been is so riddled with uncertainty that no sensible prediction based on that evidence can properly be made.

(4) Whether that is the position is a matter of impression and judgment for the Tribunal. But in reaching that decision the Tribunal must direct itself properly. It must recognise that it should have regard to any material and reliable evidence which might assist it in fixing just compensation, even if there are limits to the extent to which it can confidently predict what might have been; and it must appreciate that a degree of uncertainty is an inevitable feature of the exercise. The mere fact that an element of speculation is involved is not a reason for refusing to have regard to the evidence.

[...]”

In the context of these principles, the employer submitted in Aramark that the ET had failed to engage with the evidence and that had the ET properly understood or applied the evidence, they could not have decided on so small a discount to the total future loss.

It was suggested that:

* when the catering service was taken back in-house, the Claimant would or might have been made redundant; * the prospects were that she would not have been able to fulfil the requirements of the new service because of her disabilities; * when calculating future loss, the decision should have taken account of the general “vicissitudes of life” (such as the possibility that the claimant would have been fairly dismissed in any event or might have given up employment for other reasons).

However, the EAT could not detect any error of principle on the part of the ET in relation to their assessment of future loss. They had considered the issues as to whether the Claimant would have continued to be employed in the Salvation Army's new service and found that she would have done; they considered her difficulties and found that the Salvation Army would have been able to ensure that they would be overcome. The EAT also pointed out that the employer had accepted that what the ET had to carry out was an exercise which involved speculation. Whilst the ET had not expressly referred to the vicissitudes of life they had referred to there being a variety of reasons which gave rise to the small possibility that the Claimant's employment would not have lasted until retirement and they also said that they had assessed the possibilities of any of the ways in which loss of earnings by the Claimant should be limited. It was therefore, in the EAT’s view, unnecessary for the ET to spell out that they had taken the “vicissitudes of life” into consideration. In any event, those vicissitudes would have reflected only a very small proportion of the total discount which the Tribunal made.

For these reasons, the appeal in respect of the future loss award failed.

Practical tip
These cases show that in calculating future losses in career loss cases, it will be important to consider the evidence relating to various factors including:

* Whether the Claimant would inevitably have remained in employment until retirement. For example, would the Claimant have been made redundant, left the employment for other reasons or retired early? * If the employment would have continued, on what basis would it have continued and with what prospective remuneration? * What multiplier should be used (including whether it is appropriate to use the Ogden Tables). The correct approach to calculating lost pension benefits will also need to be considered. * What is the appropriate discount to be made for matters such as accelerated receipt and for the “vicissitudes of life”?

**Mitigation
*Requirement to mitigate
*Section 123 of the Employment Rights Act 1996 governs the approach which ETs should take to the assessment of an unfair dismissal compensatory award, including the question of mitigation. The relevant part of section 123 provides that:

“[…]
(4) In ascertaining the loss referred to in subsection (1) the Tribunal shall apply the same rule concerning the duty of a person to mitigate his loss as applies to damages recoverable under the common law of England and Wales….”

Did a Claimant’s decision to establish a new business amount to a failure to mitigate his losses? No said the EAT in [Praxis Real Estate Management Ltd v Nichols ]()UKEAT/0502/12/LA. In this short but useful judgment, the EAT provides a reminder of the principles relating to mitigation when considering an unfair dismissal compensatory award.

Background
The Claimant was dismissed on the ground of incapability. Following his dismissal he sought alternative employment in the same field of work and in the same locality, but he found there were very limited opportunities and instead set up business on his own account as a property investment agent.

He was found to have been unfairly dismissed but his award was subject to a Polkey deduction of 50%. It was for the employer to show that the Claimant had failed to mitigate his loss and the essence of the employer's case was that the Claimant had unreasonably attempted to set up a business as an investment agent and it was not realistic or reasonable to expect that he would succeed in that business given the very specialised nature of the field and his lack of experience. The employer’s contention was that the decision to set up the business was not reasonable mitigation.

The ET sided with the Claimant and held that it was not unreasonable for him to have set up his own business.

First, the ET confirmed that it was for the Respondent to prove the Claimant’s failure to mitigate. Reference was made to the Court of Appeal decision in Wilding v British Telecommunications PLC [2002] IRLR 524. In that case Sedley LJ explained that:

“…if there is more than one reasonable response open to the wronged party, the wrongdoer has no right to determine his choice. It is where, and only where, the wrongdoer can show affirmatively that the other party has acted unreasonably in relation to his duty to mitigate that the defence will succeed.”

The ET found that the establishment of a new business was reasonable because:

* as an Asset Manager, the Claimant worked in a specialised field; * in the whole of the North of England, only a dozen positions became vacant in property asset management in the 12 months following the Claimant’s dismissal and given the reference he would have obtained, the Claimant would have been unlikely to obtain one of those positions.

Therefore, the Tribunal said, his options would have been limited;

* whilst there was clearly a significant risk involved in establishing a business in a field in which the Claimant had only limited familiarity, it was not an unreasonable risk given his skills and the contacts he had developed in the field in which he was operated; * by working alongside his father's property business, the Claimant was able to utilise his father's contacts, experience and resources. There was evidence that the Claimant’s efforts were beginning to bring a return.

The employer appealed. However, the EAT decided that given the ET’s reasons (which were sufficiently expressed and therefore compliant with Meek v City of Birmingham District Council , there was no perversity and the appeal was dismissed.

**Practical tip
**Claimants should keep documentary evidence (such as job adverts and application letters) to show the steps they have taken to find new work by way of mitigation. When deciding to branch out into something different (such as starting a new business), it might be helpful to keep records of the rationale and documentary evidence showing how the business has fared and is likely to fare in future, for consideration at the ET remedies hearing.

Mark Shulman is a Consultant Solicitor with Keystone Law and an accredited workplace and employment mediator.