What compensation would you receive in a Constructive Dismissal claim?
What compensation would you receive in a constructive dismissal claim?
The compensation sums below would apply if there was a tribunal award. The vast majority of cases, however, don’t go as far as tribunal proceedings, and are capable of being settled if the right strategy is used. In these circumstances, a lump sum can be negotiated and which is loosely based on the principles set out below. Please do not hesitate obtaining professional advice in relation to your position.
Your compensation for constructive dismissal if awarded by an employment tribunal is made up of a basic award and a compensatory award.
The basic award is a statutory award that involves multiplying the relevant factors of the length of continuous service (up to a maximum of 20 years), your age and a week’s pay (as at the effective date of termination) as follows:
- One and a half weeks’ pay for each year of employment after age 41;
- One week’s pay for each year of employment between ages 22 and 40;
- Half a week’s pay for each year of employment under the age of 22.
The weekly pay which will be used to work out the redundancy payment will usually be your normal weekly gross pay at the time you were dismissed up to the maximum limit which is £544 from 6th April 2021). A week’s pay does not usually include overtime pay. The maximum basic award payment you can receive is £16,320.
A tribunal may reduce the basic award if it finds that your conduct before dismissal (or before notice of dismissal), was such that it would be just and equitable to reduce it- even if your conduct had not contributed to the dismissal.
If you have been dismissed by reason of redundancy, the tribunal will reduce the basic award by the amount of any redundancy payment you have received or awarded by the tribunal as part of the compensation. If, however, your employer fails to satisfy the tribunal that the principal reason for dismissal was in fact redundancy, then no such reduction to the basic award will be made.
After addressing the basic award, the often, more larger compensatory award will then be considered.
The Employment Rights Act provides that this will be “such amount as the Tribunal considers just and equitable in all the circumstances having regard to the loss sustained by the complainant in consequence of the dismissal insofar as that loss is attributable to action taken by the employer“.
Accordingly, the losses need to have arisen:
-as a consequence of the resignation;
-as a result of your employer’s actions;
-and that it is just and equitable to make an award.
What are the main heads of losses that be claimed under a compensatory award?
- loss of wages;
- loss of future wages;
- loss of statutory rights (it takes 2 years before you have unfair dismissal protection, or you can qualify for a redundancy payment);
- loss of pension.
In terms of wages, this includes contractual benefits, such as a company car, private medical or health insurance. It can also include non- contractual benefits, provided you have a reasonable expectation of the same. You can also include a claim for your loss of bonus or commission if you reasonably expected to receive this, even if such payments were discretionary.
Unlike in awards for unfair dismissal, you must give credit when assessing your damages, for earnings you have received in what would have been your notice period. In other words, if you start another job, for example, within 1 month of leaving, and your notice period is 3 months, you can’t claim for the further 2 month’s notice within a constructive dismissal claim.
Assessing future loss is always going to be a speculative process for the tribunal, and will depend on whether you have managed to mitigate your loss and found another job before the hearing date, at what point, and the amount of your new salary. The tribunal will need to identify an appropriate cut-off point for compensation if you have not secured any new employment as at the hearing date.
The maximum amount that you can be awarded as compensation for constructive dismissal is presently the statutory cap of £89,493 or 52 weeks gross salary- whichever is the lower. This is in addition to the basic award which can be ordered by the Tribunal of up to a maximum of £16,320. These figures are from 6th April 2021.
In calculating a year’s salary, you do not take into account benefits in kind, pension contributions or discretionary bonuses.
Assuming you win your case, the tribunal will assess your total loss, and you will have to give credit for sums already received from your employer, such as pay in lieu of notice or enhanced redundancy payments.
Under the “Norton Tool” principle, where you have been summarily or unfairly dismissed without notice or without payment in lieu of notice, tribunals would not reduce the compensation to reflect any monies received by you from another employer during the notice period. However, this is not the position if your claim is for constructive dismissal, where earnings from alternative employment during the notice period should be taken into account.
If you have already received a fairly large severance sum already, you will need to carefully consider if it is worth making an unfair dismissal claim (because of the £89,493 statutory cap). This does not, however, mean that a settlement by way of negotiation above this figure cannot still be achieved (which we have achieved many times).
As mentioned above, in making an award for compensation in these cases, an Employment Tribunal has the power to reduce both the basic award and the compensatory award. This can happen if a tribunal finds an employee’s conduct contributed to the situation, or where an employer can show that even if they had followed a correct process, the decision to dismiss would still have been the same (this is known as a Polkey reduction of damages).