Is a fear of being stigmatised in an industry sufficient excuse for a claimant failing to apply for other jobs?
The recent Employment Appeal Tribunal (EAT) decision of Hilco Capital Limited v Denise Harrington is some comfort to employers in that it requires the Employment Tribunal (ET) to examine whether there is evidence to support a claimant’s reasons for failing to seek alternative employment and reduce their claimed losses.
Facts
Mrs Harrington (Mrs H) brought a claim in the ET against Hilco Capital Limited (HCL), a financial services company.
Mrs H claimed she had been unfairly dismissed because she made a protected disclosure (whistle-blowing), disguised by HCL as a redundancy arising from a reorganisation. Her claim succeeded and following a remedy hearing in which the ET considered whether she had mitigated her losses by looking for other employment, she was granted an award of compensation (85 weeks’ pay), against which HCL appealed.
Law
Section 123(1) of the Employment Rights Act 1996 (ERA) sets out the principles by which a compensatory award falls to be calculated:
“....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 in so far as that loss is attributable to action taken by the employer...“
This clause requires the ET to examine whether the chain of causation of Mrs H’s loss has been broken or is too remote to be “attributable to action taken by the employer”, including to look at the claimant’s duty to mitigate their loss, for example by taking reasonable steps to seek out and secure new employment.
The burden is on an employer to evidence that a claimant has failed to take a step to mitigate loss, and if found proven under s123(1) the ET will not lay the loss sustained at the employer’s door.
Decision
At the ET Mrs H had acknowledged that she had not applied for any jobs with any potential or prospective new employer, or even looked for such jobs since her dismissal by HCL to the date of the remedy hearing (some three years later).
HCL argued Mrs H had unreasonably failed to mitigate her loss, unless there was a good explanation which the ET properly regarded as meaning the failure was not unreasonable. The ET however accepted Mrs H’s argument that she had not wanted to explain why she had lost her last position to new prospective employers, as demonstrating she had not acted unreasonably in failing to mitigate her loss.
The EAT ruled the ET was wrong in finding that it was reasonable for Mrs H not to have looked for or applied for any jobs at all. There was no evidence to support her assertion that, if she applied for jobs, she would have been stigmatised and rejected for being a whistle-blower as she had not applied for any jobs at all.
The EAT’s position was “there does have to be some factual finding by the tribunal, which draws on some evidence presented to it, to support its conclusions” on the reasonableness of the claimant’s actions.
As there had been no such assessment and finding of fact, the EAT remitted the matter back to the ET to consider and make formal findings of fact on whether any efforts to secure new employment would be bound to have been fruitless because Mrs H had blown the whistle.
Comment
Katherine Irvine, Associate in our Employment team comments:
“This EAT decision shows that a claimant will require to provide some form of evidence to a tribunal to support an argument that stigmatisation will affect their employment prospects. If they cannot, then a tribunal will be entitled to consider whether their failure to take steps to mitigate their losses was unreasonable, and make any relevant reduction in compensation, potentially (although rarely) to zero, in accordance with what it considers just and equitable in all the circumstances.
“Given there was a substantial award of 85 weeks’ pay to Mrs H in the above case, that has the potential to be significantly reduced when the matter returns to the ET.
“There are various steps an employer, faced with such tribunal proceedings, can take to try, and reduce its potential liability. For example:
- references given to prospective employers should not be unnecessarily adverse as the claimant securing new employment reduces the financial risk to the former employer in litigation;
- identify whether the claimant has set up their own business in the meantime, so has not applied for new roles (rather than through fear of stigma);
- ensure collation of detailed records between date of dismissal and date of Tribunal Hearing, of roles the claimant could and arguably should have been applying for within and out with the industry within a reasonable distance of the claimant’s home, so that can be produced in evidence to the Tribunal as evidence of their failure to reasonably mitigate loss.”
