APPEARANCES
| For the Appellant |
MR ADAM OHRINGER
(of Counsel)
Bar Pro Bono Unit |
| For the Respondents |
MR PHILIP ENGELMAN
(of Counsel)
Instructed by:
Messrs James Ware Baxter Schoenfeld LLP
6 Gray's Inn Road
London
WC1R 5AX |
SUMMARY
UNFAIR DISMISSAL - Compensation
This was an appeal by the Claimant against the ET's decision on amount of compensation for her automatically unfair dismissal. The Claimant advanced two grounds. Firstly, she complained that the uplift of 30% awarded for the employer's failure to follow the statutory disciplinary procedures was too low and should, on the facts found, have been the maximum uplift. The appeal was dismissed, the uplift being held to be within the range of legitimate discretionary decision-making. The second ground challenged the ET's decision that they had no power to award compensation for "stigma damages" following an adverse reference to her new employers. Appeal dismissed. On the evidence and facts found the ET were entitled to conclude that the unfavourable reference was not in consequence of the dismissal within section 123 ERA, and Chagger v Abbey National did not assist the Claimant in this case.
THE HONOURABLE MRS JUSTICE COX
- This is the full hearing of an appeal, by Emma Brown (the Claimant), against a decision of the Newcastle Employment Tribunal as to the sum of compensation to which she was entitled for unfair dismissal and wrongful dismissal in breach of contract.
- The Respondents run a residential care home for the elderly. The Claimant was employed there as an assistant care manager, having commenced her employment in November 1982. On 6 June 2008 the Claimant was summarily dismissed for gross misconduct. In a judgment promulgated with reasons on 16 February 2009 the Tribunal found her claims of automatic unfair dismissal and breach of contract/wrongful dismissal to be well-founded.
- The award of damages for breach of contract was increased by 30 per cent pursuant to section 31 Employment Act 2002, having regard to the Respondents' failure to follow the statutory disciplinary procedures then in force. The Claimant contends, in her first ground of appeal, that the procedures were wholly and wilfully disregarded in this case, and that the Tribunal erred in awarding an uplift of only 30 per cent. Her case is that only a 50 per cent uplift was appropriate on the Tribunal's findings.
- The Claimant had also sought compensation for the loss of her new employment, which she alleged was the result of an inaccurate reference and unfounded accusations made against her by the Respondents to her new employers. The Tribunal held that they had no jurisdiction to make an award of compensation for unfair dismissal under this head. The Claimant contends, in her second ground of appeal, that they erred in so holding. The Claimant's case is that, on the Tribunal's findings, her loss was in consequence of her dismissal and attributable to the acts of her employer. She was therefore entitled to compensation for "stigma damages" under this head of her claim for unfair dismissal compensation.
- In addition the Respondents are cross-appealing against the decision, on the grounds that the Tribunal erroneously failed to make findings as to the Claimant's conduct and the contractual terms between the parties; and further failed to consider and to make any deduction from the award under the Polkey principle. However Mr Engelman, appearing for the Respondents, indicated that they pursued this cross-appeal only if the appeal was allowed and an order was to be made for the matter to be remitted to the Tribunal for further determination.
The facts
- The Tribunal made the following findings of fact.
- On 25 May 2008 the Claimant, who was one of three assistant care managers employed at the home, gave one month's notice to terminate her employment on 25 June. She told the Tribunal that she was not happy working for the Respondents. She complained of Mr Baxter's "bullying" attitude towards her throughout, in the sense that "his way was the only way".
- The history of the Claimant's employment at the home was clearly not a happy one. The Tribunal found that appraisals were sporadic and undertaken on a haphazard basis. There were also allegations of inappropriate conduct by her towards elderly residents.
- The first of these allegations, made in July 2007, concerned the resident MR, who reported to another care worker that the Claimant was "somewhat rough and rude to her" when taking her to the toilet. The documents recorded that MR wished to speak to Mrs Baxter about the incident in the morning. However, there was no record that this ever happened or that any allegations were ever raised with the Claimant, who denied being told about this incident at the time and denied the allegation.
- There was a second incident, in about September 2007, concerning the resident LY, which the Tribunal described as "more worrying" and involved more serious allegations against the Claimant. These were made by LY's grandson in a letter which was before the Tribunal. In respect of this allegation the Tribunal found:
"The problem is that this incident too was crying out to be looked into properly and the claimant given an opportunity to answer the allegations against her. None of this was done."
- The incident which led to the Claimant's dismissal occurred during her notice period. It concerned her treatment of the resident KH. On 5 June this resident complained that she had been asking to be put to bed since 6pm, but that "the carers", who included the Claimant, were trying to keep her up. She complained to a night-worker, Margaret Hall, who came on duty at 7.45pm and heard her crying. Mr Baxter also returned to the premises that evening and found KH upset.
- The Claimant gave an explanation to the Tribunal about what had happened, namely that she had asked KH to wait until she had finished dispensing medication so that she could be put to bed safely. She did this because KH had previously fallen when she tried to put herself to bed. The Tribunal found as follows:
"The problem, yet again, is that enquiry into this incident was almost non-existent. The allegations being made by [KH] should have been looked into and the Claimant given an opportunity to explain them and when we say this we mean that she should have been given a proper opportunity to explain."
Referring to there being two sides of the story the Tribunal continued:
"The evidence should have been looked into and statements from other workers taken. It was not."
- On the following day, 6 June, Mr Baxter called the Claimant into an office where he was found to have,
"… fired allegations at her about what had allegedly occurred on the night before and on previous occasions relating to her failure to give adequate care to residents in the home."
- During this meeting the Claimant said words to the effect "if that's the way you are going to go on I will leave" to which Mr Baxter responded "Go then".
- The Tribunal were in no doubt on the evidence they heard that the Claimant did not resign. They found that Mr Baxter intended to dismiss her and did dismiss her, both by saying "Go then" in the office, and then telling her in the corridor afterwards to clear the building when she was trying to recover her certificates from the office administrator.
- The Claimant was therefore found to have been summarily dismissed for gross misconduct on 6 June 2008.
- Mr Baxter accepted that he had sent no Step 1 letter to the Claimant inviting her to a meeting, in accordance with the statutory disciplinary procedure. The Tribunal found that he did genuinely believe that she was guilty of misconduct. However, the Claimant's dismissal was found to be automatically unfair by reason of section 98A Employment Rights Act 1996.
- The Tribunal then focussed on whether the Claimant was, in fact, guilty of gross misconduct. However, there were difficulties in relation to this because of the lack of investigation at the time of the incidents.
- After referring to the allegations which had been made against the Claimant the Tribunal rejected Mr Baxter's evidence that, as the owner of a care home for the elderly, he was caught in a "cleft stick" between the requirements of employment law and the need to ensure the safety of the residents, whom he was unable to question in relation to complaints they made about staff behaviour. The Tribunal held:
"Large 'care sectors' employers in the country, as well as local authorities, can and do have very thorough enquiry procedures for 'protection of vulnerable adults' or POVA for short. There is no excuse for not making such enquiries as can be made for example of other members of staff. In this instance no such enquiries were made before the meeting … this was a rushed procedure disregarding not only statutory rules but basic principles of natural justice and fairness."
- It appears that a relative of LY did make a POVA referral about what had happened to her. However, no conclusion had been reached, as at the date of the hearing, because there was no investigation into the matter at the time whilst matters were fresh in everyone's mind. Mr Baxter had himself referred the KH incident, but the response of the Department of Health was that the supporting evidence did not strongly support their criteria for harm to a vulnerable adult.
- The Tribunal expressed concern that the enquiries which should have been made in this case were not made, with the result that Mr Baxter came to the Tribunal "with no evidence other than his instinct that the Claimant was rough with patients".
- They therefore stated that they reached their conclusions in this case with "less than certainty because the enquiries which should have occurred in this case simply did not".
- Somewhat curiously, the Tribunal had referred to the relevant law in this case at the very start of their judgment, before identifying the issues and setting out their findings of fact. They did so in considerable detail, the legal directions filling 11 pages of the 16-page judgment, apparently because "neither party had a correct understanding of the basic principles". The Claimant, acting in person, had claimed "far more compensation than she could ever have hoped to achieve", whereas the Respondents' representative (who was not counsel, who appeared before us in this appeal) had made "absurd submissions", including denying that the Claimant was dismissed. The Tribunal said that they regarded the facts of this case as very simple.
- Their conclusions were as follows.
"4.1 There are some reasons to believe the claimant may have been abrupt with or even rude to residents but we cannot possibly say on a balance of probabilities (which is the statutory test) what happened when or why. Opportunities given to her to explain her position were woefully inadequate. It is for the respondent to prove gross misconduct if they are to escape finding of dismissal in breach of contract. On that basis the claimant's breach of contract claim is proved. She is entitled to damages of her salary up to the 25 June. Deductions for contributory fault are not made from breach of contract damages anyway.
4.2 On the first unfair dismissal issue the claimant was dismissed. On the second issue the reason for dismissal was Mr Baxter's genuine belief in misconduct. On the third issue of whether it was the standard, the modified or neither disciplinary procedure which applied, on the statutory test it was plainly the standard procedure (there being no proof of gross misconduct under sub-paragraph (c) of Regulation 32 and even if it had been, sub-paragraph (d) is not satisfied. On earlier occasions, Mr Baxter had given an opportunity to explain and on this occasion there was no reason why he shouldn't have done the same.
4.3 This being a dismissal in breach of the statutory procedures it is automatically unfair. We then ask should we reduce the basic award on the account of her conduct. Again the burden is on the employer to show that the conduct is such that the basic award should be reduced. Because of the inadequate investigation and the inadequate evidence brought before us today they cannot discharge that burden. Therefore we will be making the basic award of 4 weeks pay.
4.4 The next issue is whether the claimant gets any award of compensation for loss of statutory rights. We find that she should not, simply on the basis that she would have lost her statutory rights anyway by virtue of her own resignation. She cannot be paid both her notice pay and a compensatory award for unfair dismissal for the same period. Therefore we make only an award of damages under the breach of contract heading and only a basic award for unfair dismissal.
4.5 The basic award is not uplifted by a percentage it is therefore 4 weeks pay which comes to £1,050.00. The damages for breach of contract we base on an agreed figure of £200 per week net. The claimant would have earned in the 19 day period between her termination and the date that her contract would have ended anyway a net sum of £541.37. We set against that a one off payment of job seekers allowance of £90.00 made to her so the breach of contract damages but for any uplift would be £451.37. To that we make an uplift under the provisions of Section 31. The basic uplift is 10% for failure to follow statutory dismissal and disciplinary procedures. We may, in certain circumstances, increase by up to 50%. We take into account what Mr Baxter has said about the difficulties of running a care home but his disregard of procedures in this case has been total. We are therefore going to make a 30% uplift of £135.41 bringing the damages for breach of contract to £586.78.
4.6 The claimant took up her new job and lost it, she says because of Mr Baxter telling her new employer she had been dismissed for gross misconduct. She believes we should be able to compensate her for this. For reasons we have set out in Section1, we are convinced we cannot. She must seek any remedy elsewhere."
We shall refer to what was said in Section 1 below.
The Appeal
(1) The Section 31 Uplift
- Section 31 (3) Employment Act 2002 (now repealed, but in force at the relevant time) provides as follows:
" 31 Non-Completion of Statutory Procedure: Adjustment of Awards
…
(3) If, in the case of proceedings to which this Section applies, it appears to the Employment Tribunal that –
The claim to which the proceedings relate concerns a matter to which one of the statutory procedures applies,
The statutory procedure was not completed before the proceedings were begun, and
The non-completion of the statutory procedure was wholly or mainly attributable to failure by the employer to comply with a requirement of the procedure,
It must, subject to sub section (4) increase any award which it makes to the employee by 10 per cent and may, if it considers it just and equitable in all the circumstances to do so, increase it by a further amount, but not so as to make a total increase of more than 50 per cent."
- It is common ground that an employment tribunal has a broad discretion in fixing the level of increase of any award in cases where an increase is appropriate. Where, between 10 per cent and 50 per cent, the percentage uplift should fall is always a question of fact and discretion for the Tribunal. In CEX v Lewis [2007] UKEAT/13/07, the Employment Appeal Tribunal held as follows:
"… in our judgment the Tribunal has a broad discretion to decide to make a reduction or increase as appropriate in the relevant award of 10% or of more than 10%, up to a maximum of 50 %, on the basis of what they regard as just and equitable in the circumstances of each individual case. The Tribunal's decision as to whether the adjustment should or should not be more than the basic minimum 10% and, if so, how much more is not confined by statute beyond the words 'if it considers it just and equitable in all the circumstances to do so'. Nor has the Tribunal's discretion been confined by authority. Parliament has not specified any particular consideration to which a Tribunal, making a decision as to the amount of any increase or decrease, must have regard. The Tribunal must reach their decision on the facts of each case on the basis of their assessment, judgment, and discretion; and the decision thus reached should not rightly be subject to attack on appeal – as has been regularly held in other areas in which the Tribunal have the decision or power to decide what is just and equitable."
- Further consideration was given by the Employment Appeal Tribunal to the exercise of this discretion in Butler v GR Carr (Essex) [2008] UKEAT/128/07, where the CEX analysis was endorsed and the Employment Appeal Tribunal declined to set guidelines for Tribunals to follow. At paragraphs 34-36 the EAT said this:
"34 The matters to be considered are unlimited. The Tribunal must do what it considers just and equitable, and what must be considered are all the circumstances. That is a formula, which is found in the relevant Sections of the Employment Rights Act. First it is found in Section 98(4) itself, which deals with fairness and liability. There, the use of the words 'in the circumstances', not 'all the circumstances', is qualified by matters including the size and administrative resources of the Respondent.
35 The second illustration of that phrase is section 123 itself, where the compensatory award is set out. That is replicated in section 31 of the Employment Act 2002, such amount as 'the Tribunal considers just and equitable in all the circumstances', but Section 31 goes on to limit matters which it must have regard to.
36 Those two analogues indicate to us that when Parliament came to consider the uplift in the context of both the finding of unfair dismissal under section 98 and an award under section 123, it did not impose words of limitation. Thus the discretion of the Tribunal, which of course must be exercised judicially, is not limited by any matter."
- Mr Ohringer, appearing on behalf of the Claimant, submits that, notwithstanding the decision to avoid setting guidelines, a helpful indication of the approach to be adopted by Tribunals is to be found at paragraphs 41-42 of this decision, where the Employment Appeal Tribunal said as follows:
"The Tribunal pitched its award in the top half of the range. Where precisely in the top half, that is between 30 and 50 using a scale of 10 to 50, it puts it, is a matter of fact, we hold. The Tribunal has considered the starting point for this as being a significant and serious breach of the statutory procedure. That depiction is correct. All three steps were disregarded. When there has been such a serious breach, it is apt for a Tribunal to place the uplift in the top half of the bracket and the Tribunal's finding as to that is also correct.
Whereabouts within the top bracket must be a matter for the discretion, exercised justly and equitably, of the Employment Tribunal. Here, the Tribunal considered whether the breach was wilful or blatant. It decided it was not a deliberate decision of the Respondent to flout the statutory regime. It therefore pitched it at the bottom end. Had it been blatant or wilful, it would have gone up."
- Mr Ohringer also draws our attention to paragraph 14 of the judgment in CEX where the Employment Appeal Tribunal observed that a Tribunal can be expected to differentiate between:
"The case of a party who has deliberately flouted statutory requirements of which that party was aware and the case of a party which has fallen into default through ignorance of those requirements rather than deliberate disregard. An employer who is unaware of those requirements will not escape the consequences of his ignorance; the dismissal will be held to have been automatically unfair; and, unless he can bring himself within S.31(4), he will have to suffer an increase of at least 10% in the award to the employee."
- Relying on these observations and looking at the facts found by the Tribunal in this case, Mr Ohringer points out that the Respondents' failure to follow the statutory procedures was found to be total. There was no Step 1 letter and no Step 2 meeting; and the Claimant was afforded no right of appeal. The Tribunal identified no mitigating factors and wholly rejected Mr Baxter's evidence as to the difficulties in fulfilling both the requirements of running a care home for the elderly and vulnerable and the requirements of employment law.
- He submits that their finding, that Mr Baxter conducted a rushed procedure and disregarded both the statutory procedural requirements and basic principles of natural justice and fairness, indicates that the failure in this case was both wilful and blatant. Although aware of the procedures, Mr Baxter chose not to follow them and made no attempt to follow even a summary procedure. Whilst he was not found to have acted in bad faith, he wilfully ignored the procedures in circumstances where the Tribunal saw fit to emphasise in their decision the difficulties caused by the failure to investigate such serious allegations at the time.
- Mr Ohringer contends that an uplift of more than 30 per cent was therefore warranted and that the Tribunal's finding at paragraph 4.5 was in error. He went so far as to submit that the maximum uplift of 50 per cent ought to have been awarded in the circumstances of this case, and that anything less than the maximum was wrong in principle.
- We have considered Mr Ohringer's submissions carefully, but in our judgment this Tribunal cannot be said to have erred in their exercise of what is accepted to be a broad discretion in each case.
- There is no necessity for the Tribunal to identify any formula for selecting the appropriate percentage uplift. Whilst we agree that a significant and serious breach of the statutory procedures would merit an uplift in the top half of the range, that is 30-50 per cent, it is entirely a matter of fact for the Tribunal as to exactly where, in the top half, the employer's conduct falls.
- In the present case, whilst there was found to be a total disregard of the procedures, there is nothing in the Tribunal's findings to suggest that they regarded Mr Baxter's conduct as wilful or blatant. There was no finding of bad faith, as Mr Ohringer accepts. Indeed, the Tribunal found at paragraph 3.6 that Mr Baxter genuinely believed that the Claimant was guilty of misconduct. As we read their decision the Tribunal found Mr Baxter's conduct to result from a misguided approach to the statutory responsibilities of an employer in charge of a care home for the elderly, rather than any decision, deliberately and flagrantly, to disregard the disciplinary procedures. Whilst his view that his responsibility for the vulnerable residents in his care could not be fulfilled by adherence to fair disciplinary procedures was in error, it was plainly a view he genuinely held.
- In our view the Tribunal properly considered all the circumstances, correctly decided that an uplift in the top half of the range was required, and awarded a percentage uplift which they considered was appropriate in the exercise of their discretion. Their decision, in our view, is unimpeachable. This ground of appeal must therefore be dismissed.
(2) Damages for Loss of Employment
- At paragraph 4.6 of their conclusions the Tribunal rejected the Claimant's claim for compensation, advanced on the basis that she lost her new job because Mr Baxter told her new employer that she had been dismissed for gross misconduct. In so doing they referred to reasons given in paragraph 1 of their decision, where they had set out the relevant law.
- We emphasise that this ground of appeal relates only to unfair dismissal compensation. Mr Ohringer does not seek to argue that the Claimant was entitled to claim damages for breach of contract for the manner of her dismissal, for the POVA referral by Mr Baxter, or for his employment reference. He accepts that the decision of the House of Lords in Johnson v Unisys Ltd [2003] 1 AC 513 and the Employment Tribunal (Extension of Jurisdiction) Order 1994 precludes such an argument.
- The relevant paragraphs dealing with compensation are paragraphs 1.16-1.19 of the reasons.
- No issue arises as to the Tribunal's calculation of the basic award for unfair dismissal. In relation to the compensatory award, the Tribunal rejected the claim for loss of statutory rights since the Claimant had served notice of termination of her employment. There is now no appeal against that finding.
- The other loss claimed by the Claimant, as part of the compensatory award, was loss of earnings. In relation to both damages of breach of contract and unfair dismissal compensation the Tribunal found as follows at paragraphs 1.18-1.19:
"1.18 Remedy for wrongful dismissal or breach of contract, is subject to the underlying rule that where a party is in breach of contract it is assumed that had he not breached the contract he would still have acted in a way most advantageous to him i.e. would have dismissed with the required notice. In a circumstance where a termination was going to take place anyway all the employer has to do is pay up to that termination date. This was decided in Addis v Gramophone Company 1908 1909 AC 488 in which the head note reads:
'Where a servant is wrongfully dismissed from his employment the damages for the dismissal cannot include compensation for the manner of the dismissal for his injured feelings or for the loss she(sic) may sustain from the fact that the dismissal of itself makes it more difficult for them to find fresh employment'.
This was approved by the House of Lords in Johnson and Unisys. In cases called Malik v BCCI, Eastwood v Magnox Electric and McCabe v Cornwall County Council, the House of Lords considered awards of damages for breach of the implied term of trust and confidence but none of those cases in our judgment assist the claimant today. The breach of which she complains is one which post dates the termination of employment. It is outside our jurisdiction by virtue of the Employment Tribunal (Extension of Jurisdiction) Order 1994 which says we can only deal with claims which arise or are outstanding in termination.
That is not to say the claimant does not have any remedy if, as she alleges today, the respondent 'torpedoed' her new job by issuing deliberately negligently untrue statements. She may have a remedy in the civil courts in an action for defamation or under the case of Spring v Guardian Insurance in an action for negligent misstatement. However the idea that unfair dismissal compensation can include damages for injury to feelings or any non financial loss was laid to rest in the case of Dunnachie v Kingston upon Hull Council.
As far as the compensatory award for unfair dismissal is concerned Section 123(1) empowers us to award such sums as are just and equitable having regard to the loss sustained by the claimant in consequence of the dismissal in so far as that loss is attributable to action taken by the employer.
1.19 The key words are 'in consequence of the dismissal'. On not exactly on the same facts Judge McMullen in the Employment Appeal Tribunal in the case of Ros and Angel v Fanstone EAT 0273/07 considered this matter. An effect can only be in consequence of an earlier act if it would not happened but for that act. If the respondent had not dismissed the claimant but suspended her on full pay (as he originally intended to) he would nevertheless have reported her actions under the POVA procedure and would have given an unfavourable reference which cost her new job. Therefore the loss sustained by the claimant is a consequence not of the dismissal but of the unfavourable reference and the POVA report. Therefore loss past the 25 June is simply outside our jurisdiction to award."
- It is clear from their decision, read as a whole, that the Tribunal heard a great deal of evidence on this issue, as their findings of fact at paragraph 1.19 and 3.2 indicate.
- In paragraph 3.2 they found that, after the Claimant gave notice and when she was looking for a new job, she had told her prospective employer that Mr Baxter would not give her a good reference. The two nurses who interviewed her told her to get another manager to supply the reference.
- In paragraph 1.19 they found that Mr Baxter had originally intended to suspend the Claimant on full pay and that, had he done so, he would still have reported her conduct under the POVA procedures and would still have given her an unfavourable reference.
- At paragraph 1.18 they further found that the breach of which the Claimant was complaining was one which post dated the termination of her employment.
- Given their approach to this head of claim the Tribunal considered that none of this evidence was relevant to their decision.
- Mr Ohringer submits that the Tribunal erred in adopting this approach, and in directing themselves that they did not have jurisdiction to award compensation for unfair dismissal in respect of the loss of her new employment.
- His essential submission is that the Tribunal took too narrow a view of their power to award compensation, particularly in light of the very recent decision of the Court of Appeal in Chagger v Abbey National Plc and Another [2010] IRLR 47, which was not available to the Tribunal at the time of their decision.
- Mr Ohringer submits that the Tribunal should have directed themselves to make the necessary findings of fact, which would enable them to decide whether the Claimant's losses flowed from her dismissal. They should have then gone on to find all the relevant facts, and to ask themselves what it was that had caused her to lose her new employment and whether it was attributable to the acts of her employer.
- On the facts of this case he submits that the Claimant had been dismissed in circumstances which damaged her reputation; and that the Respondents had made a POVA referral and given an unfavourable reference to her new employer, as a result of which she lost that employment. This was loss suffered in consequence of the dismissal and attributable to action taken by the Respondents for which the Claimant was entitled to stigma damages. The Tribunal erred in drawing a distinction between the Claimant's dismissal and the subsequent reference and POVA referral and in applying a "but for" test rather than simply asking whether these events flowed from the dismissal.
- He contends that there was a natural link in this case between the Claimant's dismissal and the damage to her reputation and loss of her job. He therefore submits that the Tribunal erred in failing to go on to consider this claim on its merits and make clear findings as to the Claimant's losses. He invites us to allow the appeal on this ground and to remit the matter to the Tribunal for reconsideration and further determination.
Discussion and Conclusion
- In considering these submissions the starting point is section 123 Employment Rights Act 1996 which provides, so far as is relevant, as follows:
"(1) Subject to the provisions of this section and sections 124, 124A and 126, the amount of the compensatory award shall be such amount as the Tribunal considers just and equitable in all the circumstances having regard to the loss sustained by the complainant in consequence of the dismissal in so far as that loss is attributable to action taken by the employer.
(2) The loss referred to in subsection (1) shall be taken to include -
(a) any expenses reasonably incurred by the complainant in consequence of the dismissal, and
(b) subject to subsection (3), loss of any benefit which he might reasonably be expected to have had but for the dismissal."
- Going back to first principles we were reminded of the decision of the National Industrial Relations Court in Norton Tool Co. Ltd v Tewson [1972] ICR 501, which set out the guiding principle behind the compensatory award for unfair dismissal, as follows:
"The Court or Tribunal is enjoined to assess compensation in an amount which is just and equitable in all the circumstances and there is neither justice nor equity in a failure to act in accordance with principle. The principles to be adopted emerge from the section. First the object is to compensate and compensate fully but not to award a bonus, save possibly in the special case of a refusal by an employer to make an offer of employment in accordance with the recommendation of the Court or Tribunal. Second the amount to be awarded is that which is just and equitable in all the circumstances having regard to the loss sustained by the complainant. 'Loss' in the context of the section does not include injury to pride or feelings. In its natural meaning the word is to be so construed, and that this meaning is intended seems to us to be clear from the elaboration contained in subsection (2). The discretionary element is introduced by the words, 'having regard to the loss'. This does not mean that the Court or Tribunal can have regard to other matters, but rather that the amount of the compensation is not precisely and arithmetically related to the proved loss. Such provision will be seen to be natural and possibly essential, when it is remembered that the claims with which the Court and Tribunals are concerned are more often than not presented by claimants in person and in conditions of informality. It is not therefore to be expected that precise and detailed proof of every item of loss will be presented, although, after making due allowance for the skills of the persons presenting the claims, the statutory requirement for informality of procedure and the undesirability of burdening the parties with the expense of adducing evidence of an elaboration which is disproportionate to the sums in issue, the burden of proof lies squarely upon the complainant."
- Mr Ohringer points out that, in that case, the NIRC expressly considered whether the manner and circumstances of the claimant's dismissal could give rise to any risk of financial loss at a later stage by, for example, "making him less acceptable to potential employers or exceptionally liable to selection for dismissal". On the facts, however, they found there to have been no such loss.
- The NIRC's approach was subsequently approved by the House of Lords in Malik v BCCI SA (in Liquidation) [1997] ICR 606, where, although the case was concerned with stigma damages in contract, Lord Nicholls referred to unfair dismissal and to the Tribunal's statutory jurisdiction to award an amount of compensation, which the Tribunal considers is just and reasonable in all the circumstances. He observed:
"Writing on a clean slate, the Courts have interpreted this as an enabling awards to include compensation in respect of the manner and circumstances of dismissal if these would give rise to a risk of financial loss by, for instance, making the employee less acceptable to potential employers …"
- In Chagger, the Claimant brought proceedings for, amongst other things, unfair dismissal and race discrimination. His claims were upheld, the Tribunal finding that his dismissal was automatically unfair because of the employer's failure to follow the statutory dismissal procedures; and that the employers had directly discriminated against him on racial grounds in dismissing him.
- In assessing the compensation payable to him the Tribunal took into account the risk that future potential employers might decline to employ him because he had brought Tribunal proceedings against a past employer. In doing so they treated the issue of stigma as part of the evidence relating to the Claimant's attempts to mitigate his loss. The Claimant had submitted extensive evidence relating to his numerous and unsuccessful attempts to find another job in the finance industry. He had subsequently commenced retraining to become a teacher.
- He believed that his difficulties in getting a job were due in part to the stigma of having brought proceedings against a past employer. The Tribunal accepted that evidence and found that the Claimant should be compensated for the loss of his earnings for the rest of his working life in "equivalent or better paid employment". The Employment Appeal Tribunal upheld the Tribunal's decision on liability, but allowed an appeal by the Respondents against the remedy decision, holding that the risk that future potential employers might decline to employ the Claimant because of his claim was not a matter which could be reflected in his compensation. Accordingly the EAT found that the Tribunal had been wrong to award compensation under this head.
- The Claimant appealed and one of the issues before the Court was whether, in the case of a discriminatory dismissal, the dismissing employer should bear "stigma loss", or whether the employee should be expected to recover that from the employers who stigmatise him.
- Rejecting the employer's submissions Elias LJ, giving judgment of the Court, held as follows at paragraphs 89-90:
"89
We see considerable force in Mr Jeans' argument, but ultimately we reject it. We consider that the original employer must remain liable for so-called stigma loss. First, we do not accept Abbey's broad submission that the mere fact that third party employers contribute to, or are the immediate case of, the loss resulting from their refusal to employ of itself breaks the chain of causation. If those employers could lawfully refuse to employ on the grounds that they did not want to risk recruiting someone who had sued his employer and whom they perceived to be a potential trouble maker, we see no reason why that would not be a loss flowing directly from the original unlawful act. Indeed, it is now firmly established that if a stigma attaches to employees from the unlawful way in which their employer runs his business, then the employer will be liable for losses which may result from the fact that other employers will not want to recruit employees because of their link with the business: see Malik v BCCI
90
We recognise, of course, that Malik concerned a different kind of stigma than arises here, but it shows that the mere fact that third party employers are the immediate cause of the loss does not free the original wrongdoer from liability. The fact that the direct cause is their decision not to recruit does not of itself break the chain of causation. Nor can the action of the employee in taking proceedings conceivably be treated as such an act. It is a necessary step in order to obtain a remedy for the employer's wrong; it would be absurd if it were to distance the employer from the effects of that wrong."
- At paragraphs 93-94 they continued:
"93
It is also material to note that it is only in the context of discrimination laws that the concept of victimisation discrimination has been developed. Each of the discrimination statutes provides for a free-standing wrong of victimisation, but it is not always unlawful for third party employers to refuse to recruit someone who has sued his own employer. For example, an employee who has taken proceedings for unfair dismissal could be stigmatised in that way quite lawfully. It would be unsatisfactory and somewhat artificial if tribunals were obliged to discount stigma loss in the context of discrimination law but not in other contexts.
94
In our judgment the stigma loss is in principle recoverable. It is one of the difficulties facing an employee on the labour market."
- In this case the Court were considering stigma damages as part of mitigation. They went on to consider the situation where the employee would still have been dismissed even if there had been no discrimination, saying this at paragraph 99:
"There is one exceptional case where it could be necessary for a tribunal to award compensation specifically by reference to the impact of stigma on future job prospects. This is where this is the only head of future loss. An example would be if in a case such as this a tribunal were to find that the claimant would definitely have been dismissed even had there been no discrimination. He would be on the labour market at exactly the same time and in the same circumstances as he would have been had he been dismissed lawfully. Accordingly, the damage to his employment prospects from the stigma of taking proceedings would be the only potentially recoverable head of future loss. Here, however, the employee would be asserting that this is a head of loss, and the onus would be on him to prove it. In practice this would be a difficult task. If he does establish such a loss, the tribunal will then be faced with the almost impossible task of having to assess it. The tribunal would have to determine how far difficulties in obtaining employment result from general market considerations and how far from the stigma. In the unlikely event that the evidence of stigma difficulties is sufficiently strong, it would be open to the tribunal to make an award of future loss for a specific period. But, in the more likely scenario that the evidence showed that stigma was only one of the claimant's difficulties, it may be that a modest lump sum would be appropriate to compensate him for the stigma element in his employment difficulties. This approach would be analogous to the lump sum awards sometimes made in personal injury cases to compensate an injured claimant for the risks of future disadvantage on the labour market: see Smith v Manchester Corporation (1974) 17 KIR 1. Even then, however, this should not be an automatic payment; there should be some evidence from which the tribunal can infer that stigma is likely to be playing a part in the difficulties facing the employee who seeks fresh employment."
- Relying on Chagger Mr Ohringer submits that the principles set out in the decision should apply in this case. An award for unfair dismissal compensation can include damages to compensate not only for stigma arising from the process of litigation, but for the damage to reputation caused by a dismissal. So long as the relevant events flow naturally from the dismissal, compensation is recoverable.
- He submits that the Tribunal therefore erred in pulling the shutter down on this Claimant's claim and not going on to consider stigma in her case and how it was caused. In this case the stigma arose naturally from the dismissal and the communications which followed it, namely the reference and the POVA referral, and the Tribunal erred in considering the matter on a "but for" basis. These events were attributable to the Respondents. It was an unusual feature of this case that the Claimant could actually point to a particular job she had secured, but which she then lost as a result of her employer's actions.
- These were interesting and attractively presented submissions but, having been taken to the evidence adduced below, and having considered carefully the Tribunal's findings of fact, we have concluded that the Tribunal were not in error, and that it was open to them to conclude that the Claimant's claim under this head was not justiciable.
- We were taken through the evidence adduced below in some detail. Ultimately, the main difficulty for Mr Ohringer in making good his submissions is that the factual foundation for them is not that which he has advanced.
- We begin with what the Claimant was alleging in this case, and the factual issues before the Tribunal. In her ET1 her case was based squarely on the reference. She alleged that the Respondents had advised her new employers, when they were seeking a reference, that she had been dismissed "making a number of serious allegations". As her new job was subject to a good reference she was dismissed.
- In their ET3 the Respondents denied that they had ever given her a reference, stating:
"The Respondent was alarmed to discover that following an enquiry from Alice Drife, UK Director of Community Integrated Care (CIC) the Claimant had obtained a position with CIC, working on a one-to-one basis with vulnerable adults, on the basis of a reference purporting to be from the owner of Careham Hall. Ms Drife contacted the Respondent to verify that the details contained in this reference were correct. The Respondent confirmed to Ms Drife that no reference had been given by him or anyone with the authority to do so. A subsequent investigation revealed that the reference was given at the request of the Claimant by a member of staff who had no authority to give such a reference."
- The Tribunal referred to the fact that much evidence was given before them concerning these matters. Mr Engelman accepts that findings of fact were not made in respect of all the issues raised, but the question for us is whether there was evidence to support the findings that were made.
- Mr Engelman drew our attention to the undisputed documentary evidence adduced before the Tribunal and relied on by the Respondents. In particular, the Respondents relied on regulation 37 of the Care Homes Regulations 2001/3965 and their statutory duty as registered persons, pursuant to that regulation, to give notice "without delay" to the Commission for Social Care Inspection (CSCI) of the occurrence of "any allegation of misconduct by the registered person or any person who works at the care home". The Claimant did not and does not dispute this.
- Pursuant to this statutory duty, on 10 June 2008 the Respondents notified CSCI, by completing the statutory notification form, of the incident which had led to the Claimant's dismissal.
- In an email from CSCI dated 7 July 2008, the Respondents were requested to refer the matter in addition to the local safeguarding team and were asked whether they had "notified the POVA List" of the Claimant's dismissal.
- On 10 July an initial, local safeguarding meeting took place at Careham Hall following CSCI's request, attended by representatives from CSCI and Northumberland Social Services. The minutes refer to a discussion of the following:
"Allegation of abuse made against Miss Emma Brown by resident Mrs KH 05/06/2008 followed by the instant dismissal of Miss Emma Brown 06/06/2008 and the alleged subsequent re-employment in the care sector working one-to-one in the community with mentally disabled young people, with no reference from Careham Hall – previous employer."
- The outcome of this meeting, as recorded, included the following: "Careham Hall to make POVA referral in retrospect".
- By this stage the Claimant had received a letter from her new employer (CIC) dated 7 July 2008 confirming that, following her recent interview, they had "now received two references satisfactory to CIC" and informing her that her employment was conditional upon receipt of satisfactory disclosure from, amongst other things, the POVA Register.
- Following the outcome agreed at the safeguarding meeting on 14 July Mr Baxter sent a referral form to the manager in charge of the POVA List, giving details of the background and relevant incidents involving the Claimant together with accompanying documentation. At box 19 on this form Mr Baxter said this:
"We believe Miss Emma Brown is working in Duns for CIC caring for young mentally disabled persons on one-to-one basis. We are concerned we have not had a request for a reference from CIC. It is our understanding a reference from the previous employer is essential."
- Attendance notes dated 22 July show that Alice Drife, UK Director of CIC, telephoned the Respondents on 22 July about this and about a reference received for the Claimant which gave the name "Kirsty Moscrop" (an assistant care manager at Careham Hall) as her referee and was signed by her. The page with the Respondents' address on was missing and there was no official stamp. Mr Baxter asked to be sent a copy of this document as he was "unaware that the Respondents had been asked to provide any reference for the Claimant". Subsequently, Ms Moscrop was suspended pending an investigation into her provision of a fraudulent reference.
- Mr Baxter telephoned Miss Drife back on 22 July, informing her of this and of the fact that the Claimant had been dismissed for verbal abuse towards a resident and had been referred to POVA. He informed Miss Drife that a further investigation was being carried out into a complaint which had been made by the relative of one of the residents.
- It is not in dispute that the communications which took place on 22 July were the only communications between Alice Drife and the Respondents.
- We note that, on her application form for new employment, the Claimant named her present employer as Kirsty Moscrop, crossing out Mr Baxter's name and the Careham Hall address. Further, question 7 of the reference form provided by Ms Moscrop asked the following: "Has the above named [the Claimant] been or is subject to any formal disciplinary action?" and "Is there any formal disciplinary action that is still outstanding or subject to appeal?" To both of these questions Ms Moscrop had answered "No".
- On 4 August 2008 CIC wrote to the Claimant confirming her suspension from duty as of 22 July, in order for an investigation to be carried out into the following allegations:
"Providing a fraudulent reference
Failing to disclose previous allegations/disciplinary actions with previous employer".
- Subsequently, the fraudulent reference charge was abandoned. A disciplinary hearing was held with the Claimant on 27 August 2008, following which she was dismissed for gross misconduct. CIC's letter to her confirming this, dated 1 September 2008, reads as follows:
"I am writing to confirm the outcome of the meeting you attended on 27 August 2008 in accordance with the organisation's disciplinary procedure to discuss the allegation that you failed to inform CIC that you were under investigation from your prior employer. You were informed that this matter was serious and that summary dismissal could result. You were provided with all the evidence gathered concerning this case. You were accompanied at the meeting by Val Wallace, Support Worker from Station Court. You were advised of the detail resulting from the investigation into the above issue as follows:
- Service Director, Alice Drife, was informed by a stakeholder that you were under investigation for abuse at your previous employment. The Service Director contacted your past employer, Mr John Baxter, who confirmed you were under investigation by POVA and Social Work and that you had been dismissed due to these allegations.
- It was explained to you that the only evidence presented was from your past employer. You did not submit evidence to support your statement that you were not under investigation or had not been reported to POVA/Social Work.
I therefore confirm your summary dismissal for gross misconduct from CIC's employment without notice r(sic) pay in lieu of notice for failure to disclose you were under investigation by a previous employer."
- Finally, the Department of Health wrote to the Claimant on 5 November 2008 informing her that in relation to the POVA referral the case had been closed because the supporting evidence did not "strongly support our criteria for harm to a vulnerable adult".
- In their decision the Tribunal observed that the Claimant had alleged before them that the Respondent "torpedoed" her new job by "issuing deliberately negligently untrue statements" (see paragraph 1.18), and that she had lost her new job because of Mr Baxter telling her new employer she had been dismissed for gross misconduct (see paragraph 4.6).
- On the evidence the Tribunal found as follows:
(1) that when the Claimant was looking for a new job she had told her new employer that Mr Baxter would not give her a good reference and that she was told by those interviewing her to "get another manager to do so".
(2) that there was evidence showing that the Claimant may have been abrupt with or even rude to residents but that the Respondent had not proved gross misconduct on a balance of probabilities given the lack of adequate investigation at the time (see paragraph 4.1).
(3) that a POVA referral had in fact been made by a relative of LY in relation to "more worrying" allegations against the Claimant.
(4) that the breach of contract of which the Claimant complained was one which post dated the termination of her employment.
(5) that Mr Baxter had originally intended to suspend the Claimant and that, had he done so, he would nevertheless have reported her actions pursuant to the POVA procedure and would have given her an unfavourable reference which cost her new job. The loss sustained by the Claimant was therefore a consequence "not of the dismissal but of the unfavourable reference and the POVA report." Therefore loss past the 25 June was outside their jurisdiction to award.
- The Tribunal made these findings on the basis of the Claimant's allegation that the Respondents had "torpedoed" her new job by giving her an adverse reference. We do not consider that the Tribunal wrongly applied the provisions of section 123 in deciding as they did.
- When considering an award of compensation under section 123 a Tribunal must answer three questions:
1. Was the loss occasioned as a consequence of the dismissal?
2. Was the loss attributable to the conduct of the employer?
3. If so was it just and equitable to award compensation?
Having considered all the evidence their conclusion on the facts of this case was that the loss sustained by this Claimant was not a consequence of the dismissal. There is no perversity challenge to any of the findings made in their decision, and in particular no challenge to the finding that the Respondents would have given this Claimant an unfavourable reference even if she had not been dismissed.
- In our judgment the Tribunal were entitled to approach this in the way that they did and did not err in law, as the Claimant contends. The question whether the loss alleged is a consequence of the dismissal is always a matter of fact for the Tribunal. Whilst it is correct that they used the words "but for" in paragraph 1.19, it is clear that they were finding on the facts of this case, having regard to both the oral and documentary evidence before them, that the unfavourable reference did not flow naturally from this dismissal and was therefore not "a consequence" of it.
- That finding was clearly open to them on the evidence. It is apparent that Mr Baxter told Ms Drife, some six weeks after the dismissal, that the Claimant was the subject of a POVA investigation and had had complaints of abuse made against her, which was factually correct; and that the Claimant was dismissed by her new employer for failing to disclose that she was under investigation by her previous employers.
- In Ros and Angel v Fanstone [2007] UKEAT/0372/07, to which the Tribunal referred, the EAT considered the assessment of loss for a dismissed employee who would have resigned in any event. The claimant/employee had given one month's notice of termination and, on the last day of that notice, she was summarily dismissed for gross misconduct. The claimant contended that life had been made much more difficult for her in the labour market by reason of her dismissal for gross misconduct because, as the Tribunal found, the employers were unwilling to provide her with a clean reference.
- The EAT held:
"That is not a matter which sounds in these proceedings as a breach of the statute [section 123] or of contract. There is no obligation to provide a reference. Whether or not [the respondent] dismissed the claimant it would still be able to withhold a reference from her. So there is no finding that shows that losses were attributable 'to the dismissal'."
- This in our view provides a helpful parallel with the present case. The Tribunal in this case concluded that Mr Baxter's initial intention was to suspend the Claimant. It is not in dispute that he would then have been under a statutory duty to report her and would have given her an unfavourable reference in any event. This also applied to the POVA referral.
- Ultimately therefore, on our analysis, the case of Chagger does not assist the Claimant. This was not a case about stigma damages. It was a case concerning the loss which flowed from reports and referrals, which the employers were required to make and, as the Tribunal found, would have made in any event, even if the Claimant had not been dismissed.
- For these reasons the Tribunal were entitled to conclude as they did in relation to this head of claim and we dismiss this ground of appeal in addition.
- In these circumstances, the Respondents do not pursue their cross-appeal and that too stands dismissed.
