Compensation caps and whistleblower protection

Background

In the case of SPI Spirits (UK) Ltd and anor v Zabelin, a dispute arose between Mr Zabelin and his employer, following the employer's decision to make pay cuts during the COVID-19 pandemic. After initially agreeing to a temporary pay cut, Mr Zabelin raised concerns when the pay cut was extended. He believed that the pay cut created a stressful and toxic environment amongst colleagues, and suggested the company was using the pandemic as an excuse to cut pay without transparency.

Having raised these concerns, Mr Zabelin's entitlement for a discretionary bonus was reviewed. When he objected to this, the company terminated Mr Zabelin's employment on the spot. Mr Zabelin brought claims including one for unlawful detriment and automatically unfair dismissal for making protected disclosures.

Tribunal decision

The Tribunal upheld Mr Zabelin's claims. It awarded him over £1.6 million in compensation, having assessed the loss flowing from the detrimental conduct and his dismissal, and having applied a 20% uplift for the company's failure to follow the ACAS Code.

The company argued that Mr Zabelin's compensation should be capped at £270,000. It referred to a clause in Mr Zabelin's contract of employment which said that this was the amount Mr Zabelin would be paid in the event of the termination of his employment, subject to a confidentiality and non-competition agreement. The company argued that given the presence of that clause, it would be just and equitable to cap compensation to this amount. The company appealed to the EAT on this basis.

EAT outcome

The EAT dismissed the appeal. It found that the effect of the contractual clause was to effectively contract out of a statutory entitlement in circumstances where Parliament has not permitted any such disapplication. This could not be just and equitable and the Tribunal was right to find the contractual clause to be void.

Learning points

This is an interesting case because it explores the link between the termination provisions of an employee's contract of employment, and their entitlement to compensation in the event of unfair treatment and a successful Tribunal claim. In Mr Zabelin's case, his contractual clause could not be used as a means by which to argue that it would be just and equitable to limit his compensation, when his actual losses had been valued far higher.

If you would like further information or advice, please contact Michael Halsey in our Employment team on 020 7665 0842, or complete the form below.