In a recent employment law case, Tao Herbs and Acupuncture Ltd v Jin J, the claimant employee was awarded compensation following her claim for unfair dismissal.
The respondent employer appealed to the Employment Appeals Tribunal (EAT), primarily on the basis that the tribunal had failed to take account of the economic situation faced by the business when considering whether to make a ‘just and equitable’ reduction to the claimant’s award under s.123 of the Employment Rights Act 1996.
More particularly, the employer argued that the tribunal had failed to apply Polkey v AE Dayton Services Ltd by considering whether, given the recession and the fact that the business was trading in a downturn, the claimant would still have been dismissed had a fair procedure been followed. Secondly, the tribunal’s award was not ‘just and equitable’ as it was so substantial that, if it were paid, the business would go into liquidation.
The EAT upheld the tribunal’s compensatory award and held that the tribunal had not erred in failing to consider an employer’s ability to pay the award or its impact on the employer’s business. This is not a relevant consideration under s.123 of the Employment Rights Act 1996, which provides that a compensatory award shall be an amount the tribunal considers just and equitable in all the circumstances.
The EAT commented that any tribunal hearing a case in 2009 would have been aware of the difficult trading circumstances caused by the recession. Furthermore, the tribunal had made a finding that the financial difficulties faced by the business were why there had been problems paying the claimant’s salary, and it had not made any award for the claimant’s losses beyond the date of the hearing. The EAT considered that this showed that the tribunal was alert to the argument that the claimant’s employment may not have survived the recession and had in mind the principles in S.123(1) ERA and Polkey.
This case is a warning to employers that they cannot rely on any financial hardship when trying to argue that a Tribunal has awarded too higher a compensation figure.