Unfair Dismissal and Injury to Feelings
This month we would like to concentrate upon a significant recent decision of the Court of Appeal which has caused major ripples among employment lawyers but more importantly has potentially a significant impact upon the level of compensation awards in some types of unfair dismissal claims – this is the decision that compensation for injury to feelings may be awarded in unfair dismissal cases.
The statutory right to unfair dismissal protection was first introduced by the otherwise ill-fated Industrial Relations Act 1971 and ever since the first significant decision on the point in 1972, Employment Tribunals and Courts have determined that the intention of the unfair dismissal legislation was that compensation for unfair dismissal should be based upon identifiable financial losses only. The 1972 decision was made by the National Industrial Relations Court (the predecessor of Employment Tribunals) in a case called Norton Tool Company v Tewson (1972 ICR 501) and has remained the generally accepted position over the years since. Having said that, eyebrows were raised a couple of years ago when a passing remark was made by the House of Lords about possible compensation for injury to feelings in unfair dismissal cases. Now however, the Court of Appeal have well and truly upset the applecart.
Compensation for injury to feelings is well known to Employment Tribunals in discrimination cases. Outside of the Tribunal system however, the House of Lords had established, almost one hundred years ago, in the case of Addis v Gramaphone Co. Ltd [1909] AC 488 that in ordinary breach of contract claims pursued in the courts, there was no power to award damages specifically for the manner of dismissal no matter how badly the employee may have been treated – such claims were limited to any financial loss incurred. Whilst the reasoning was not precisely the same, unfair dismissal compensation was assessed on the same basis.
In the recent case of Dunnachie v Kingston upon Hull City Council ( 2004 EWCA Civ 84), the Court of Appeal, by a majority, has determined that the Norton Tool case was wrongly decided and that Employment Tribunals do indeed have power to award compensation for injury to feelings in unfair dismissal cases.
The essential facts of Dunnachie were that, that the Applicant resigned his position as a local authority environmental health officer following a lengthy period of being undermined and harassed by a colleague and which treatment his employers had failed to properly address. The Tribunal described the treatment as a clear case of a breach of the implied term of trust and confidence. He successfully claimed that he had been unfairly constructively dismissed. The nature of the treatment to which Mr. Dunnachie had been subjected was such that he had suffered a great deal of distress and humiliation, had required medical treatment (although there was no formal evidence of a recognised medical condition) and had been reduced to a state of overt despair. In determining his compensation, the Tribunal awarded the Applicant his financial losses together with the sum of £10,000 for injury to his feelings.
In reaching this decision, the Tribunal had regard to observations made in a House of Lords case in 2001 called Johnson v Unisys Ltd. (2003 I AC 518), where one of the law lords (Lord Hoffman) had suggested that compensation for unfair dismissal could, in appropriate cases, include compensation for injury to feelings. These comments caused some controversy at the time and have done so ever since because of the well established Norton Tool principle. Many legal commentators considered the observations as one of those judicial asides which would be confined to the annals of history and which did not herald a change in the law as they were not directly relevant to the issues in the Johnson case. However, there were a number of Tribunal cases where the comments in Johnson were taken literally and compensation for injury to feelings was awarded.
The Employment Tribunal in Dunnachie followed the Johnson lead and made an award for injury to feelings. The decision was appealed to the Employment Appeal Tribunal which overturned it and restored the orthodoxy of Norton Tool. However, there was a further appeal to the Court of Appeal and on 11th February the judgment of the Court of Appeal was handed down and has restored the original Tribunal award overturning the Norton Tool principle.
By a 2 to 1 majority, the Court of Appeal has held that the Norton Tool case was wrongly decided. The decision was based primarily on the wording of the legislation under which compensation for unfair dismissal is ordered which is currently s.123 Employment Rights Act 1996 but has remained almost identical in its terms since 1971. The majority of the Court of Appeal took the view that the statutory provisions on their true construction did not permit only compensation for pecuniary loss. The dissenting judge (Brooke LJ) was persuaded by the fact that the law had remained constant since 1972, notwithstanding that parliament had made numerous other changes to unfair dismissal legislation since then. This he thought was a powerful argument in support of the submission that the law which developed was what parliament intended otherwise it would have been changed by parliament.
The majority (Sedley LJ and Evans-Lombe J) made it clear that any award for injury to feelings would only be appropriate in relation to the manner of dismissal and not purely for the fact of dismissal. It was said that compensation would not be recoverable for every upset caused by the dismissal and there would have to be real distress/humiliation/damage to standing and/or reputation for an award to be made. They envisaged that such awards would not be made in, as it were, routine unfair dismissal cases but might be appropriate in constructive dismissal cases where effectively the employee is driven out of work and there has probably been a sustained course of treatment over a period of time.
The Court of Appeal were unanimous on one point and that was that if an award for injury to feelings was appropriate, then the level of award on the particular facts of the Dunnachie case was in line with such awards made in discrimination cases and in particular, within the Vento (Vento v Chief Constable of West Yorkshire Police No.2 2003 IRLR 102) guidelines for such cases.
Is this point now resolved? The position is unclear at the moment. The Court of Appeal, rather unusually indicated that it would be prepared to grant permission to appeal to the House of Lords if such was sought but it is not known whether there will be an appeal. At present therefore, the position rests with the Dunnachie decision which under the doctrine of binding precedent is binding upon the lower courts and tribunals. However, the concluding remarks of one of the majority judements, that of Sedley LJ, were to advise Tribunals to manage cases on the bases that the last word on this issue had not as yet been said anticipating an appeal to the House of Lords.
The law as it currently stands is therefore that successful applicants for unfair dismissal can claim compensation for injury to feelings in relation to the manner of their dismissal if the circumstances warrant such an award. Such awards if made, would not of course affect the current statutory cap on the compensatory award but will in the longer term lead to a higher average level of award in ‘bad treatment’ type unfair dismissal cases.
Latest news is that there will be an appeal to the House of Lords which has been given an expedited but still provisional hearing date of 19th & 20th May. We should therefore have a definitive ruling in the not too distant future.
If you would like further information please do not hesitate to contact Kevin McKernan, Head of Employment Unit at Crutes Law Firm.
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