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Are Deductions Fair at the ET?

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In employment law the principle of deducting a financial amount from a successful employee’s compensation for unfair dismissal, is deep rooted and has become a normal part of proceedings.

Briefly, the Tribunal may make a deduction from the gross remedy amount in any of three circumstances:

1) In accordance with s.122 of the Employment Rights Act 1996 – A Tribunal may have regard to the amount it finds the employee’s actions ‘contributed’ to the dismissal and make a deduction equal to that amount.

2) In accordance with the House of Lords (now Supreme Court) case of Polkey v AE Dayton Services Ltd [1988] 1 AC 344 – A Tribunal may have regard for the likelihood that the employee would be dismissed anyway during the compensation period and make a deduction equal to that likelihood (be that a percentage or in time).

3) In accordance with the Common Law principle of mitigation – An employee is required to make reasonable efforts to secure alternative employment to the financial value s/he would receive in compensation. A Tribunal may deduct an amount reflecting any lack of mitigation.

But is this fair? The result is often some level of deduction and depending on the Judge can amount to a majority of the award deducted for one or a combination of reasons. Does this let the employer off the hook, because there is such an opportunity for deductions?

English law only recognises the need to compensate the victim for his/her loss and does not recognise a need to punish the offender, unlike the American jurisdiction. The reality though is that progress with employment rights is surely only made through an employer’s desire to not pay a financial award to the employee in the Tribunal. In other words, seek to avoid financial punishment; in real terms then, there is no carrot here, only the threat of a stick. If employers become increasingly aware that they can unfairly dismiss and the financial penalty for that breach is minimal as a result of likely deductions, then surely the law provided to protect employees is itself significantly diminished.

Darren Martin

CLR 21/8/16


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