Compensation for unfair dismissal does not include loss for breach of trust and confidence

Compensation for unfair dismissal does not include loss for breach of trust and confidence

26 February 2008

Compensation for unfair dismissal does not include loss for breach of trust and confidence

The Court of Appeal in GAB Robins (UK) Limited v Triggs 2008 has held that an employee can only be compensated by an employment tribunal for loss sustained in "consequence of the dismissal" as provided for by s.123 Employment Rights Act 1996 and that loss flowing from wrongs already inflicted upon her by the employer's prior conduct could not be taken into account.  Compensation awarded for the employee's unfair dismissal should therefore take into account the fact that the employee was, at the time of the dismissal, in receipt of sick pay that would soon be exhausted (as opposed to her normal rate of pay).

The Court held that although Mrs Triggs could sue for damages for the financial losses flowing from the employer's prior breaches of the implied term of trust and confidence, such losses could only be claimed in the civil courts as part of a common law claim.

Mrs Triggs had resigned from her employment as a secretary, after suffering from stress as a result of bullying and overwork. She had raised a grievance but was not satisfied with the way it was dealt with.  She resigned stating she had no option, due to her ill health as a result of stress and the company disregarding her grievance issues.  When her employment terminated, she had been on sick leave for six months, had exhausted her right to company sick pay and was receiving statutory sick pay.

She won a claim for constructive unfair dismissal. In considering the level of compensation, the tribunal concluded that Mrs Triggs was not entitled to recover loss of earnings prior to her dismissal.  She was, however, entitled to recover loss of her full wages following her dismissal for such time as the tribunal considered to be reasonable.

The employer appealed to the EAT and then the Court of Appeal on the issue of compensation.

In reaching its decision the Court of Appeal reviewed the decisions in Johnson v Unisys Ltd (Johnson) and Eastwood v Magnox Electric plc; McCabe v Cornwall County Council (Eastwood).

In Johnson the House of Lords held that employees cannot seek compensation in the civil courts in respect of the manner of dismissal (whether actual or constructive) as this would duplicate the employee's right to claim compensation for unfair dismissal under the statutory procedure.

Usually steps taken by an employer leading to an employee's dismissal will not cause financial loss.  However, in exceptional circumstances where financial loss does result from an employer's failure to act fairly in the period before the dismissal, the House of Lords in Eastwood confirmed that the employee has a claim for civil damages which exists independently of any claim relating to the subsequent dismissal.

Applying these decisions, The Court of Appeal allowed the appeal and overturned the Employment Tribunal and EAT's decisions.  It held that the acts of bullying, which had caused Mrs Triggs' illness were breaches of the implied term of trust and confidence and did not constitute the dismissal.  The constructive dismissal came when she accepted the breach and resigned.  Her reduced earning capacity was as a result of her illness, and was not "suffered in consequence of the dismissal".

Impact on employers
This case acts as a reminder to employers that, even where an Employment Tribunal has awarded compensation for unfair dismissal, the employee may have a further claim in the civil courts for losses which flow from the behaviour that led to the dismissal.

In constructive dismissal cases it will be important to identify which losses arise as a result of the employer's prior breaches and which from the dismissal itself.  Medical evidence may be required. 

An employee has three years in which to bring a claim for damages in the civil courts for personal injury where the employer's repudiatory breaches of contract have caused an employee to suffer ill health resulting in financial loss.

It should be noted, however, that claims for personal injury caused by discriminatory acts can (and must) be included as part of a discrimination claim in the tribunal.