compensation Employment Appeal Tribunal mitigation unfair dismissal

Important guidelines concerning the “duty to mitigate”

job-searchIt is often heard that a claimant has a duty to mitigate his or her loss, in other words to take reasonable steps to minimise losses resulting from the wrongdoing in respect of which compensation is claimed. This applies to many areas of law such as commercial contract disputes and accident claims, as well as in the field of employment law.

However, the extent of the duty is often overstated and it is generally the duty of the wrongdoer to demonstrate failure to mitigate. Even if it does so, it does not necessarily follow that it will be taken into account.

The duty to mitigate with reference to loss of earnings in a breach of contract claim was confirmed as long ago as 1912 in the case of British Westinghouse Electric and Manufacturing Co Ltd v Underground Electric Railways Co of London Ltd. In Wilding v British Telecommunications plc (2002) the Court of Appeal provided general guidance that the onus is on the employer to show that the worker unreasonably refused an offer of re-employment, the test of unreasonableness is an objective one based on all the evidence, when applying the test the attitude of the employer, the circumstances in which an offer may have been made and refused and the way in which the employee was treated should be taken into account and the court or tribunal should not be too stringent in its expectations of the injured party.

That guidance has recently been refined and expanded by the then President of the Employment Appeal Tribunal, Mr Justice Langstaff, in the case of Cooper Contracting Ltd v Lindsey.

Mr Cooper had been self-employed for a number of years before taking a job as a carpenter with Cooper Contracting in March 2011. His employment was terminated after 21 months on 29 December 2013. No reason was given since Coopers took the view that he was self-employed. An employment tribunal disagreed and found that he was unfairly dismissed. When dealing with the assessment of compensation the Employment Judge at the Tribunal observed as follows:

In the course of evidence Mr Lindsey was asked what he had been doing since his dismissal.  He told me that he has resumed working as a tradesman on his own account advertising principally on the My-builder website.  He was asked whether he had considered taking up another employed post either with a local employer or perhaps on building sites further afield.  He and Mrs Lindsey were very clear that working on building sites, whilst being something he had done in the past, would not be suitable now for [health] and family reasons and I accept that there may come a time in a person’s working life when some types of work are no longer appropriate.  As far as looking for another employed position is concerned, Mr Lindsey’s evidence was that he preferred to be his own boss having had the experience of employment with the Respondent.  It is very much his own choice, therefore, to continue with the financial ups and downs of self employment as a jobbing tradesman.

He continued:

The conclusions that I have reached are these.  Firstly, I find that it was reasonable for the Claimant to resume his previous life as a self-employed tradesman upon his dismissal: that is what he knew and where his recent experience lay.  I find that it has been reasonable for him for continue in that way to the present date.  I am satisfied however that there are other opportunities out there for employed work with higher remuneration if the Claimant wished to look for them but the Claimant has plainly decided that self-employment is the path he prefers for the future.  Whilst I am satisfied that his past losses to date ought to be reflected in the compensatory award I think the fact that he is unwilling to consider alternatives in the future makes it just and equitable for there to be a more limited award of future compensation than might otherwise be justified on a strict analysis of the figures.  I have therefore determined that as far as loss of earnings is concerned the Claimant should recover his loss of earnings to date and that I should assess future loss of earnings over a period of three months.  Thereafter, whilst I am sure there will be a continuing loss of earnings, it will reflect the Claimant’s desire to be his own boss rather than his value on the employed market for tradesmen.

I should point out that three months’ future loss is at the very lowest end of what might be expected with awards equating to between 12 and 36 months being far more common.

On appeal Mr Justice Langstaff was critical of the approach to mitigation often taken in tribunals:

As to mitigation, it seems to me there are very considerable dangers in an approach that suggests that the duty to mitigate is a duty to take all reasonable steps to lessen the loss.  This may divert focus away from the legal principles that apply to mitigation and demand too much because it may seem to lead to a conclusion that if a Respondent can show one reasonable step that was not taken the Respondent will succeed.  Recent experience in this Tribunal shows that the principles by reference to which an assertion of failure to mitigate loss is advanced are too often mis-stated, misunderstood or misapplied.  In part this may be because when applying those principles a court may express it in shorthand appropriate to the argument before it and in context of the particular facts but which when applied as a precedent can easily lead to error if too casually extrapolated to those other cases.

He went on to consider the relevant cases and then, very helpfully, distilled the main principles as follows: