The general purpose of damages and compensation in civil cases in UK law is (so far as money can do so) to put the winner of a case as nearly as possible in the position he would have been if he had not been wronged. Hence compensation is generally unlimited, although there are, of course, statutory limits in certain cases, such as the cap on the compensatory award that an employment tribunal can order in unfair dismissal cases (currently £68,400).
The Court of Appeal has recently given new guidance on how courts and tribunals should approach two particular issues which can arise in the calculation of compensation in employment cases involving dismissal (Wardle v Credit Agricole Corporate and Investment Bank  EWCA Civ 545 – Court of Appeal on 11 May 2011 and 1 July 2011).
In 2008 banker Mr Wardle applied for a £120,000 post with his employer, Credit Agricole Corporate & Investment Bank (known in the UK as “Calyon”); he was unsuccessful. Calyon appointed a French national instead. Mr Wardle complained of race discrimination to an employment tribunal and shortly afterwards was dismissed. The tribunal concluded that he had suffered direct race discrimination and victimisation and awarded him substantial compensation. In total, it came to just over £300,000.
Two elements of this award came under scrutiny during the subsequent appeals against the tribunal’s rulings. The first concerned the now-repealed statutory dismissal procedures, which applied at the time of Mr Wardle’s dismissal. Calyon had blatantly failed to follow them. To reflect that the tribunal added an uplift of 50% to that part of the compensation (£124,177.87) which represented losses wholly referable to the dismissal. The second concerned future losses: the tribunal found a 70% chance of returning to a comparable banking job by 2011, and then awarded steadily reducing compensation for the period thereafter down to the further point in time when it was confident that Mr Wardle would find an equivalent job.
As had the Employment Appeal Tribunal before it, the Court of Appeal addressed these two particular issues.
On the uplift point, the tribunal’s decision was based on the statutory requirement that it should apply a minimum 10% and, if it considered it just to do so, up to a 50% uplift to reflect the failure to abide by the correct procedures. Although that statutory requirement has been abolished from April 2009 failure to abide by the (non-legally binding) ACAS Code of Practice can result in a similar uplift of between 0% and 25%: accordingly the principles outlined by the Court of Appeal still apply.
The employment tribunal awarded the maximum 50% uplift because Calyon had paid no more than lip-service to the statutory dismissal procedure requirements then in force. In doing so the tribunal did not take into account the large size of the award and the impact on the overall total that such a large uplift would have. Both the EAT and the Court of Appeal said those factors should have been taken into account, the Court of Appeal saying: “The size of the award ought in an appropriate case to be a factor informing the tribunal’s determination [of the amount of uplift] … No doubt in most cases where the compensation is modest it will not affect the tribunal’s analysis. But in other cases it can be a highly material consideration”. At the beginning of this month the Court of Appeal said the uplift should be 15%.
As for future losses, the Court of Appeal stated that the employment tribunal had been wrong to work on the basis that it must award damages/compensation until the point where it was confident Mr Wardle would find an equivalent job. It agreed that there would be the occasional “rare case where it is appropriate for a court to assess compensation over a career lifetime”. However, once the tribunal considered itself able to pinpoint a date when there was a likelihood of a return to a banking job (i.e. 2011) – albeit a 70% chance – then this would not be one of those “rare cases”.
In effect, once the tribunal identifies such a point the clock stops there, and there is no basis for awarding any compensation for periods after that date. There is inevitably an element of uncertainty in the calculation: a tribunal must assess (i) how likely it is that the dismissed employee will be able to get an equivalent job and (ii) how long that is likely to take. It will adjust the award in an attempt to take into account that the employee may be lucky and secure a new job quickly, in which case he will receive more in compensation than his actual loss, or he might be unlucky and find the job later than predicted, in which case he will receive less than his actual loss.
As the Court of Appeal put it, “in practice the speculative nature of the exercise means that the Tribunal’s prediction will rarely be accurate. But it is the best solution which the law, seeking finality at the point where the court awards compensation, can provide”.