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Facts: The employee, Ms Davidson, was dismissed at age 61 after failing an alcohol test at work. She claimed unfair dismissal.
Tribunal decision
The Tribunal found the dismissal procedurally unfair because the appeal process had been mishandled, but upheld the employer’s right to dismiss overall.
Ms Davidson was 63 by the time of the Tribunal hearing. Although she had quickly found new work after her dismissal, it was at a lower salary. Her state pension age was 66, but she gave evidence that she would need to work until 70 for financial reasons.
When calculating compensation, the Tribunal limited her future loss to the period ending once she reached 65 years old. It factored in the salary increases she would have received from her employer, but did not account for potential pay rises in her new job due to lack of evidence.
The Tribunal also noted that she had already been awarded 2.5 years of past loss, which it considered significant. On that basis, it deemed it just and equitable to cap future loss at age 65. Ms Davidson appealed.
EAT decision
The EAT upheld the appeal, finding that the Tribunal had applied the wrong test. It was not enough for the Tribunal to rely solely on what it considered ‘just and equitable’; it should have provided a properly reasoned basis for its assessment. In particular, the Tribunal should have taken into account all relevant evidence, including Ms Davidson’s stated intention to work until age 70 for personal and financial reasons. It also needed to consider whether that intention might change over time and factor in potential intervening events, such as ill health or other uncertainties of life.
The case was therefore remitted to the Tribunal for the compensation award to be recalculated.
Implications: This decision makes it clear that Tribunals must assess future loss based on all relevant evidence and not just rely on what it considers just and equitable – even if this does involve an element of speculation. This includes taking into account an employee’s intention to work beyond the typical retirement age, where that intention may properly increase the value of the award.
This is likely to become of greater relevance to employers – particularly when negotiating settlement – if and when the cap on compensatory awards is removed in the Employment Rights Act.
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