EAT confirms broad approach to deduction of state benefits from discrimination compensation

Background

In the case of Foat v Department of Work and Pensions, the claimant succeeded in claims for disability-related harassment, failure to make reasonable adjustments and constructive unfair dismissal.

The Employment Tribunal found that a series of acts between 2018 and 2019 culminated in the claimant’s resignation. The claimant suffered severe depression, anxiety and fibromyalgia, and the Tribunal accepted medical evidence that the employer’s unlawful conduct had caused a significant deterioration in his health.

At a separate remedy hearing, the Tribunal awarded compensation of approximately £374,000, including substantial awards for personal injury, injury to feelings, past and future loss of earnings, and pension loss.

Both parties appealed aspects of the compensation award.

EAT decision

The Employment Appeal Tribunal dismissed all of the claimant’s grounds of appeal but upheld one aspect of the employer’s cross-appeal, reducing the overall compensation award to approximately £335,000.

One of the most significant issues concerned the treatment of the claimant's PIP. The claimant argued that PIP should not have been deducted from compensation because it was intended to meet care and mobility needs rather than compensate for lost earnings.

The EAT rejected that argument. It confirmed that the central question was whether the claimant would have received the benefit “but for” the employer’s unlawful conduct. In this case, the claimant only became entitled to PIP because of the injuries caused by the employer’s discrimination. The Tribunal had therefore been entitled to deduct the benefit from the compensation award.

Importantly, the EAT also rejected the argument that state benefits can only be offset against equivalent “like for like” losses. It held that there was no rule preventing a care-related benefit such as PIP from being deducted against a loss of earnings award.

The claimant also argued that the Tribunal should have treated PIP as offsetting unclaimed care needs provided by his wife. However, the EAT held that tribunals are required to assess the losses actually claimed and proved. The claimant had not advanced a formal claim for everyday care costs, so the Tribunal could not be criticised for failing to account for them.

The EAT also upheld the Tribunal’s approach to future loss contingencies. The Tribunal had reduced the future loss multiplier by 50% to reflect various risks, including the claimant’s pre-existing vulnerability to mental ill-health and the possibility that his health would have deteriorated even without the employer’s unlawful conduct. The EAT confirmed that this was an evaluative assessment the Tribunal had been entitled to make on the evidence.

On the employer’s cross-appeal, however, the EAT found that the Tribunal had mistakenly used a gross salary figure rather than a net salary figure when calculating future loss of earnings. This error reduced the future loss award significantly.

Learning points for employers

This decision provides useful guidance on how tribunals approach compensation in complex discrimination claims, particularly where long-term ill-health and substantial future losses are involved. In respect of its analysis of state benefits, the EAT focused on whether the benefit arose because of the employer’s unlawful conduct rather than whether it directly corresponded to a particular head of loss.

For more information or advice, please get in touch with Jessica Scott-Dye in our Employment team.