Compensation for unfair treatment

Two important rulings were given this week by the House of Lords, both of which are likely to be reported on at length in the employment law press.

The first judgment, in the cases Eastwood and another -v- Magnox Electric plc and McCabe -v- Cornwall County Council and others, found in favour of the two employees in the first case and one employee in the other, thereby giving them leave to make claims for damages for alleged unfair treatment by their employers in the period leading up to their dismissals. The unfair dismissal legislation, which provides for hearings before employment tribunals, sets an upper limit (currently £;55,000) on the compensatory award for unfair dismissal. Under the statutory unfair dismissal rules, a compensatory award cannot take into consideration the psychological damage caused by unfair treatment by the employer in the period leading up to the dismissal. The Law Lords drew a distinction between unfair treatment in connection with the dismissal itself, which is protected by unfair dismissal legislation, and unfair treatment in the period leading up to the dismissal, which is a matter of common law. The judgments in these two cases now allow the employees concerned to make a common law claim for breach of an employer's implied contractual obligation to act fairly. The damages that may be awarded for such claims are unlimited.

The second case, Dunnachie -v- Kingston-upon-Hull City Council, not unrelated to the judgment above, found in favour of the employer and reinstated the prior decision of the Employment Appeal Tribunal. The Law Lords confirmed that the loss that is compensated for by the compensatory award does not allow for the inclusion of compensation for non-economic damage, such as humiliation, injury to feelings and distress. Section 123 of the Employment Rights Act 1996 allows the compensatory award to take only the employee's financial loss into consideration.

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Sources:
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