Unfair dismissal and Employment Tribunal awards – a deep dive into the remedies of reinstatement and re-engagement
We spend a lot of time talking to our clients about how to avoid unfairly dismissing their employees and what kind of “paper trail” they need to have in order to demonstrate that they have acted fairly and reasonably during the course of dismissing a member of staff. What rarely gets discussed, however, is the possible types of award that an employment tribunal might order in the event that an employer is on the receiving end of a tribunal judgment declaring that it has unfairly dismissed the claimant. What never gets discuss is the consequences of failing to comply with a tribunal order in circumstances where re-employment is ordered.
What are the possible awards a tribunal can order?
By far the most common award in an unfair dismissal case is that of compensation. Most awards of compensation fall under two main headings: the basic award and the compensatory award.
The basic award is normally calculated in exactly the same way as a statutory redundancy payment and is intended to compensate the employee for loss of job security.
The compensatory award is intended to compensate the employee for financial loss suffered as a result of the unfair dismissal (subject to a current maximum of £115,115 (from 6 April 2024) or 52 weeks’ pay, whichever is the lower).
Although the current maximum compensatory award is £115,115, according to the annual employment tribunal award statistics, the median (middle) award for unfair dismissal claims in the 2023/24 reporting period was well under £10,000, at £6,746, while the mean (average) unfair dismissal award in the same reporting period was significantly higher, at £13,749. It is likely that the difference between the two figures is as a result of a very few high awards rather than because a significant number of claimants have received much higher awards.
Reinstatement – an order that the employee be re-employed in his or her old job as if they had never been dismissed – is the first “remedy” that a tribunal should consider when it finds that a complaint of unfair dismissal is well founded. Re-engagement – an order that the employee be re-employed by their former employer in a job comparable (but not the same as) that from which they were dismissed, or in other suitable employment is the second “remedy” that a tribunal should consider when it finds that a complaint of unfair dismissal is well founded.
In spite of the fact that both these remedies require to be considered by the tribunal before the remedy of compensation, these remedies are rarely used and occur in fewer than 2% of successful cases. While this is probably not surprising when one thinks about how impractical and/or undesirable the award may be for both parties in most cases, employers would be naïve to think that no tribunal would put them in a position of requiring them to reinstate or re-engage a previously dismissed employee.
When reinstatement or re-engagement is ordered
In circumstances where reinstatement or re-engagement is ordered by the tribunal, the employer will be expected to pay to the employee any amount payable in respect of any benefit which the employee might reasonably be expected to have had but for the dismissal (including arrears of pay) for the period between the date of dismissal and the date of reinstatement or re-engagement, in addition to the restoration of any rights and privileges which the employee would otherwise have enjoyed.
At the point at which liability is determined, it is incumbent on the tribunal to consider the three remedies in the strict order of reinstatement, re-engagement and compensation. In other words, in giving consideration to the remedies, a tribunal should first consider whether reinstatement is a suitable remedy and should only go on to consider the alternative remedy of re-engagement in the event it deems reinstatement unsuitable. Only if the tribunal considers that neither reinstatement nor re-engagement are suitable, will it go on to consider the remedy of compensation.
Further, where a tribunal upholds an unfair dismissal complaint, it must explain its powers to make a reinstatement or re-engagement order and ask the employee if they wish such an order to be made. While a employee’s preference should be stated on the claim form (ET1), the absence of such a request will not bar them from intimating their preference for one or other remedy at the tribunal hearing.
Section 116(1) of the Employment Rights Act 1996 (“ERA”) makes it clear that a tribunal must give specific consideration to the following in determining whether to make an order for reinstatement or re-engagement:
- Whether the employee wishes to be re-employed by the employer
- Whether it is practicable for the employer to comply
- Whether it would be just to make either type of order where the claimant’s conduct caused or contributed to some extent to their dismissal
The answers to the above questions will vary from case to case and must be considered fully by a tribunal where a declaration of unfair dismissal is made.
So what happens if the employer does not comply with an order for reinstatement or re-engagement?
Where a re-employment order is made, the tribunal will also specify a date by which the order must be complied with. In the event that the employer fails to comply with the order, the tribunal shall make an award of compensation to be paid by the employer to the claimant – in other words, the tribunal is bound to make an award of financial compensation to the claimant in the event that, firstly, a re-employment order was made and, secondly, the employer has failed to fully comply with the terms of the order (section 117(1), ERA). In such circumstances, the tribunal shall make:
- An award of compensation (encompassing both the basic award and the compensatory award mentioned above); and
- Unless the employer satisfies the tribunal that it was not practicable to comply with the order, an additional award of compensation of an amount not less than twenty six nor more than fifty-two weeks’ pay to be paid by the employer to the employee.
Given the condition that an additional award of compensation will be payable if – and only if – the employer is unable to demonstrate that it was not practicable to comply with the re-employment order, in practical terms it will usually be necessary for an employer to address the tribunal on its failure to comply with the order. This, in effect, gives the employer a second “bite at the cherry” in persuading the tribunal that re-employment is not practicable.
Further, although the additional award appears to have a potentially significant monetary value, in fact, in most cases, the combined value of the award of compensation and the additional award are subject to the statutory cap on the compensatory award (currently £115,115, as noted above). Taking this – and the employee’s duty to mitigate their loss – into account means that in most cases the statutory cap will not be reached, even where the maximum additional award is awarded.
The statutory cap can, in some cases, be lifted by the tribunal. In circumstances where the amount due to a higher paid employee’s arrears of pay etc (covering the period from the date of dismissal to the intended date of re-employment) would be restricted by the statutory cap, in spite of there being no statutory cap on the amount recoverable, the tribunal will disapply the statutory cap to the extent necessary to enable the aggregate of the compensatory and additional awards fully to reflect the amount specified as payable in respect of the arrears of pay etc.
The issue of lifting the statutory cap was considered in the recent case of Huddersfield University v Duxbury ([2023] EAT 72), where the Employment Appeal Tribunal held that an employment tribunal had wrongly allowed the statutory cap to be exceeded in a situation where the employer had been ordered to reinstate the employee and pay £67,469.78 in respect of the period between the date of termination and the date of reinstatement. The tribunal had correctly recognised that this amount, awarded to the employee, fell to be treated as part and parcel of the compensatory award for unfair dismissal after the employer refused to comply with the reinstatement order. However, the statutory limit may only be disapplied where the aggregate of the compensatory and additional awards would be less than the amount ordered on reinstatement. In this case, the aggregate of the compensatory award, at what would otherwise have been the statutory maximum (£63,532.81), and the additional award (£27,300) produced a total sum of £90,832.81. Given that this was considerably more than the £67,469.78 identified as payable by way of arrears of pay etc, it was not “necessary” for the statutory cap to be exceeded.
A word to the wise
While re-employment orders are made in a small number of cases, employers would be foolish to disregard the possibility they will be ordered to reinstate or re-engage a previously dismissed employee. While they will undoubtedly get a second chance to address a tribunal on the practical difficulties they face in re-employing the employee, the financial consequences of a failure to comply with a tribunal’s order of re-employment can be significant and are probably best avoided. Decisions to dismiss should always be taken seriously and similarly a decision not to comply with a tribunal’s order should be made only after fully assessing the risks involved.
This update contains general information only and does not constitute legal or other professional advice.
Dawn Robertson, Partner & Accredited Specialist in Employment Law: dro@bto.co.uk / 0131 222 3242 / Connect with Dawn on LinkedIn
