EAT upholds reduced Acas uplift on £1.7 million award

Background

In Sheikholeslami v University of Edinburgh, the Employment Appeal Tribunal (EAT) considered two issues arising from a long-running unfair dismissal and disability discrimination claim.

The claimant had originally been awarded compensation of under £100,000, including a 25% uplift for the employer's unreasonable failure to follow the Acas Code of Practice on Disciplinary and Grievance Procedures. Following a successful appeal, the EAT remitted the compensatory award for unfair dismissal and significant elements of the disability discrimination compensation, including economic loss and injury to feelings, to a fresh tribunal for reconsideration. The revised award exceeded £1.7 million.

When reassessing remedy, the tribunal reduced the Acas uplift from 25% to 2.5%, although the overall monetary value of the uplift increased to around £30,000 because it applied to a much larger award. The tribunal also decided not to gross up the award for tax immediately, concluding that the tax treatment of several elements of the compensation was genuinely uncertain. Instead, it recorded the employer's undertaking to meet any tax liability and preserved the claimant's ability to return to the tribunal if grossing up later proved necessary.

The claimant appealed both decisions.

Decision

The EAT dismissed the appeal.

It held that the tribunal was entitled to reconsider the Acas uplift when reassessing the underlying compensation. The uplift is not a freestanding finding but forms part of the tribunal's overall assessment of what is "just and equitable" in the circumstances. Although the employer's failure to follow the Acas Code remained serious, the tribunal was entitled to conclude that a lower percentage uplift was appropriate in light of the substantially larger compensation award.

The EAT also upheld the tribunal's approach to grossing up. It accepted that the tax treatment of different elements of the award was genuinely uncertain and that the tribunal had adopted a sensible and pragmatic solution by recording the employer's undertaking to meet any tax liability while preserving the claimant's ability to return to the tribunal if further adjustments became necessary.

Learning points

The decision confirms that where an appeal results in a remedy being reconsidered, parties should not assume that an earlier Acas uplift will automatically be preserved. The tribunal must determine afresh what uplift, if any, is just and equitable in light of the revised compensation award.

The judgment also demonstrates that, although tribunals will usually gross up awards where the tax consequences are clear, they may adopt a different approach in exceptional cases involving genuine uncertainty over the tax treatment of complex awards. Where this occurs, employers should ensure that any undertakings regarding tax liabilities are clearly documented.

In unfair dismissal claims, the compensatory award cap currently serves as a moderating factor when applying the Acas uplift for an unreasonable failure to follow the Acas Code of Practice on Disciplinary and Grievance Procedures. However, this mechanism will cease to operate once the removal of the compensatory award cap takes effect in January 2027. 

For more information or advice, please get in touch with Khadija Khatun in our Employment team.