Guidance on Reducing Unfair Dismissal Awards
The Employment Appeal Tribunal (EAT) has provided useful guidance on when an employee's compensation can be reduced to reflect his or her failure to mitigate loss.
Facts
In Cooper Contracting Ltd v Lindsey, Mr Lindsey worked as a carpenter for Cooper Contracting Ltd (CCL) for 21 months until he was dismissed in December 2013.
Mr Lindsey claimed unfair dismissal and was successful. After his dismissal, Mr Lindsey chose not to seek alternative employment but worked as a self-employed tradesman. The Employment Tribunal (ET) found that there were opportunities to take higher paid, employed work, but that Mr Lindsey's decision to go back to self-employment was a reasonable course of action.
As a result, the ET decided not to reduce Mr Lindsey's compensation on the grounds of a failure by him to mitigate his loss.
CCL appealed, arguing that because the tribunal found there was better paid employment available, the ET should have also found that Mr Lindsey had failed to mitigate his loss.
Decision
The EAT dismissed the appeal, finding that the duty to mitigate loss is not a duty to take all reasonable steps to reduce the loss. The EAT gave some useful guidance on the principles governing mitigation of loss, including that:
- it is up to the respondent employer to put forward evidence that the employee has failed to mitigate his or her loss, otherwise an employment tribunal is under no obligation to make such a finding
- the respondent employer would have to show that the employee acted unreasonably and what is reasonable and unreasonable is a matter of fact
- the fact that it would have been reasonable for an employee to have taken a better paid job does not necessarily satisfy the test that the employee acted unreasonably in not taking that job. This may however be important evidence to assist an employment tribunal.
Best Practice
The EAT's guidance shows how difficult it can be to show that a former employee has failed to mitigate their financial losses.
The case is a reminder to employers who are involved in litigation or potential litigation with employees to gather evidence about mitigation at an early stage. This may be useful in settlement negotiations as well as at the end of the litigation process when the ET is calculating an award for financial loss. Such evidence could include online searches for relevant job vacancies and general research about the job market in the relevant area.