Mitigation of Loss in Unfair Dismissal Cases

Mitigation of Loss in Unfair Dismissal Cases

Compensation for unfair dismissal normally includes loss of earnings flowing from the dismissal. When looking at this, Employment Tribunals will consider whether the employee has taken reasonable steps to mitigate their loss of earnings.

A recent Employment Appeal Tribunal decision provides a helpful reminder to employers of the test that Tribunals will apply.

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The Case

The ET in Edwards v Tavistock and Portman NHS Trust had applied a percentage reduction to Mr Edwards’s compensatory award to reflect its conclusion that he had failed to mitigate loss of earnings.

The EAT found that the Employment Tribunal had been wrong to do this and confirmed that the Tribunal should have identified what steps should have been taken to mitigate; the date on which that step would have led to a job and, thereafter, to reduce the amount of compensation by the amount which would have been earned.

The Decision

The EAT confirmed that the employer has the burden of demonstrating that the employee has failed to take reasonable steps to mitigate their loss. This serves as a helpful reminder to employers . The concept of mitigation of loss can often by overlooked when a claim is first received. However, it is an area which the employer can, from a tactical perspective, use as part of settlement negotiations. It can also reduce the award made if the case is lost.

As soon as an employee brings proceedings, the employer should gather evidence of the job market in the relevant sector as it existed at the point that the employee lost their job.

What Can We Learn?

This information is not always easy to secure retrospectively so it is useful to start compiling evidence early. Recruitment consultants can be contacted and lists of vacancies obtained. All of this information should be kept.

It can then be used in settlement discussions with ACAS (especially if the employee is claiming that they are struggling to find work and are going to have on-going loss of earnings) and, ultimately, if a finding of unfair dismissal is made, as part of a submission that the employee has failed to take reasonable steps to mitigate their loss.

Being able to point to vacancies which the employee failed to apply for will help the Tribunal in its consideration of what steps it was unreasonable for the employee not to have taken.