In this case, the EAT held that a tribunal had been wrong to find that an employee's entitlement to unfair dismissal compensation for future loss should end on her 65th birthday.
Facts
Ms Davidson was employed by National Express Ltd (NE Ltd) as a coach driver at Stansted airport. She failed an alcohol breath test upon arrival at work one day. Following a disciplinary investigation and hearing, she was summarily dismissed for gross misconduct, and her internal appeal was unsuccessful.
An employment tribunal held that Ms Davidson's dismissal was unfair due solely to flaws in the internal appeal process. Ms Davidson was 61 at the date of her dismissal, and 63 by the time of the tribunal hearing. She had found an alternative job relatively quickly after the termination of her employment with NE Ltd, but at a lower rate of pay. Her state pension age was 66, and her evidence was that she would need to continue working until age 70 due to personal and financial circumstances.
When assessing compensation, the tribunal determined that the period of future loss for which Ms Davidson should receive compensation should end on her 65th birthday. It took into account future salary increases that Ms Davidson would have received had she remained employed by NE Ltd, but did not consider possible increases she might have received in her new employment as there was no evidence on this point. It also referred to the fact that the overall compensatory award included past losses for a 2.5 year period, which it considered to be substantial. The tribunal therefore considered that cutting off assessment of Ms Davidson's future loss at age 65 was just and equitable in all the circumstances. Ms Davidson appealed.
The EAT held that the tribunal had been wrong to cut off Ms Davidson's future loss at her 65th birthday.
The legislation provides that tribunals must assess compensatory awards for unfair dismissal on the basis of what is just and equitable, looking at the loss the employee has sustained insofar as that loss is attributable to the employer dismissing them. The EAT recognised that there is an inherent element of uncertainty in the assessment of future loss. However, in deciding matters of impression and judgement, the tribunal must take account of any evidence which might assist it in fixing just compensation. The mere fact that there is an element of speculation involved is not a reason for refusing to have regard to the evidence.
In this case, it was relevant that Ms Davidson's current intention was to continue working until age 70. However, it was possible that this might change in the future, or be thwarted by contingencies of life such as ill health. The tribunal did not appear to have evaluated these potential variables, even in a broad-brush way, and its reasoning on the relevance of future pay increases and the period of past loss covered by the award was not based on any principled approach. Indeed, the tribunal appeared to have decided to cut off future losses at Ms Davidson's 65th birthday based on an "overall feel" that this was just and equitable, rather than grappling with the evidence to come to a reasoned assessment of future loss arising from the dismissal.
The EAT therefore remitted the assessment of compensation to the tribunal for reconsideration.
What does this mean for employers?
Assessments of future loss covering long periods are relatively rare in ordinary unfair dismissal claims due to the cap of 52 weeks' pay that applies to the compensatory award. The cap hadn't been reached in this case because the tribunal had applied a significant Polkey deduction to reflect the chance that Ms Henderson would have been fairly dismissed following a fair internal appeal, and a further significant deduction for contributory fault.
This case makes clear that tribunals must base their assessment of future loss on all of the evidence, even if this does involve an element of speculation. Employers seeking to minimise their liability might submit evidence in support of a shorter period of future loss, e.g. if there is neutral market data available that shows typical tenure in the role only lasting a short time.
