Remedies for unfair dismissal

If an employee has been found to have been unfairly dismissed, the tribunal has a first duty to explain the remedies of reinstatement and re-engagement and see whether the employee wants to be re-employed. The essential difference between the two is that under reinstatement employees return to the employer in their old job as if they had never been removed. Re-engagement means that they will be taken back by the employer in a new job or in the old job but at a different location, or even by a different company within the group. Employees should enjoy the same advantages as if there had been no interruption in service. Employers can be ordered to take back an employee, but in practice this remedy is only awarded in about 1 per cent of all cases.

The alternative and more usual remedy is compensation. The compensation will be made up of a basic award which is calculated following an arithmetic formula in much the same way as redundancy payment, according to the number of years' service. In addition there will be an additional compensatory award which is subject to a maximum limit.

Although there is a potential of high awards for unfair dismissal, most awards made are low, which causes dissatisfaction with the remedy.

Statutory claim. Employees must establish that they have been continuously employed for a period of two years and an action must be brought to the tribunal within three months of the effective date of the termination. The legislation, however, excludes claims in respect of (i) employees past normal retiring age, (ii) persons on strike and (iii) spouses of the owner of the business.

Common law action for wrongful dismissal Employees can always bring an action for wrongful dismissal at common law and claim damages. The problem here is that, since contracts of employment – apart from fixed term contracts – always allow the employer to terminate the employment by giving the employee adequate notice, the courts have limited damages to the net wages during the notice period. Jurisdiction for breach of employment contracts has now been granted to industrial tribunals under the Industrial Tribunals Extension of Jurisdiction (England and Wales) Regulations 1994.

The limit for damages is the same as for the lower court and fixed at £25000. There is no qualification period in relation to claims, nor any minimum hours of service, and claims can be brought by any ex-employee.

It would be possible for employees with two years' continuity of employment to bring statutory and common claims which, adding both claims together, will enable a maximum compensation of £36000.

Damages for breach of a contract of employment Contract damages are intended to put the person in the position they would have been in had the contract been properly performed and employees will be entitled to the loss that they have suffered through the contract being wrongly terminated, usually the value of their remuneration package for the time it would have taken to terminate the contract properly.

Compensation is limited to contractual entitlement. In Powell v. Braun [1954], Powell was given an increased annual bonus instead of a wage increase. The court held that, although previously discretionary, by being given in place of a wage increase it had become contractual.

Apart from wages, damages are likely to include profit share, lost commission, pension, cars, medical and other insurance, any cheap loan or mortgage subsidy or educational benefit taken up by the employee, and free or reduced cost goods and services and expenses which do not have to be accounted for and so need not be incurred. Payments by third parties are also included, such as tips to a waiter. The courts refuse to award damages for injured feelings or the fact that the dismissal is likely to make finding new employment more difficult. It was thought that the decision in Cox v. Philips Industries Ltd [1976], where damages were awarded for the plaintiff’s emotional distress when he was demoted, would lead to a change in the law but in Bliss v. South East Thames Regional Health Authority [1987] the court followed the earlier case in rejecting a claim in respect of illness said to have been the result of the dismissal.

Redundancy.

An employer is liable to make a redundancy payment to an employee who has been continuously employed for at least two years and who is (a) dismissed, or (b) laid off or kept on short time for four or more consecutive weeks or for a series of six weeks or more within 13 weeks.

The payments must be of at least the statutory minimum. These are: (i) for each year of employment at age 41 or over but under 65, one-and-a-half weeks' pay; (ii) for every year of employment at age 22 or over but under 41, one week's pay; (iii) for each year of employment at age 18 or over but under 22, half a week's pay.

There is a maximum sum per week which changes regularly and a maximum number of years of service which counts, currently 20 years.