Parry v National Westminster Bank plc

The Court of Appeal considered whether an amount specified by a tribunal under section 114(2)(a) of the Employment Rights Act 1996 for benefits and arrears payable between termination and reinstatement is "ring-fenced" and therefore not subject to the statutory cap on compensatory awards in section 124. The tribunal had ordered reinstatement, quantified a section 114(2)(a) sum and, when the employer refused to comply, awarded compensation comprising a basic award, a compensatory award subject to the statutory cap, an additional award under section 117 and the section 114(2)(a) arrears. The Employment Appeal Tribunal held that the section 114(2)(a) amount is not a free-standing head immune from the cap except in the specific exceptions provided by section 124.

The Court of Appeal dismissed the employee's appeal. It held that sections 117, 118, 123 and, in particular, section 124 must be read together. Section 124 identifies and confines the circumstances in which the statutory cap may be exceeded, and it does not support treating the section 114(2)(a) figure as automatically immune from the cap unless that figure itself exceeds the cap or another statutory exception applies. The tribunal erred in effectively ring-fencing the section 114(2)(a) amount.

Background and parties:

• The claimant/respondent, National Westminster Bank Plc, dismissed the appellant, Frederick Wynne Parry, on 6 June 2002 after 33 years' service. Mr Parry was manager of the University of Birmingham branch.
• On 7 May 2003 an Employment Tribunal found his dismissal unfair and adjourned remedies. At the remedies hearing the tribunal ordered reinstatement, and, because the bank signalled it would not comply with an order for reinstatement, quantified sums payable under section 114(2)(a) and awarded compensation.

Nature of the claim and procedural posture:

• Mr Parry sought reinstatement and, when that proved impracticable because the employer would not comply, compensation for unfair dismissal. The Employment Tribunal awarded four elements: a basic award, a compensatory award equal to the statutory cap then in force, an additional award under section 117 and a separate sum of arrears and benefits under section 114(2)(a) covering the period from dismissal until the point when the employer confirmed non-compliance.
• The employer appealed to the Employment Appeal Tribunal, which held that the section 114(2)(a) element was subject to the statutory cap under section 124 and allowed the employer's appeal. Mr Parry obtained permission to appeal to the Court of Appeal.

Issues framed by the court:

1. Whether the section 114(2)(a) sum is a free-standing head of recovery not subject to the statutory compensatory cap in section 124 of the Employment Rights Act 1996; and
2. If not, whether any statutory provision permits exceeding the cap so as to fully reflect the section 114(2)(a) sum.

Court's reasoning and conclusions:

• The court analysed the interplay of sections 113–125 (in particular sections 114(2)(a), 117, 118, 123 and 124). It accepted the Employment Appeal Tribunal's reliance on earlier EAT authorities including Selfridges Ltd v Malek and Midland Mainline v CM Wade.
• The court concluded that section 114(2)(a) requires the tribunal to specify amounts payable under a reinstatement order, but that these sums are not automatically immune from the cap when an order is not complied with. Sections 117–124 for calculating compensation must be read together. Section 124 expressly identifies the circumstances in which the statutory limit may be exceeded, including where the section 114(2)(a) amount itself exceeds the cap.
• The tribunal had erred by treating the section 114(2)(a) sum as ring-fenced and thereby allowing an aggregate award above the cap without regard to the statutory scheme. The Employment Appeal Tribunal was correct to allow the employer's appeal. The Court of Appeal dismissed the employee's appeal.

The court noted sympathy for employees disadvantaged by the cap but emphasised that the statutory wording determines the available remedies.

Appeal dismissed. The Court of Appeal held that the Employment Tribunal erred in treating the amount specified under section 114(2)(a) as a separate, ring-fenced head of compensation immune from the statutory cap in section 124 of the Employment Rights Act 1996. Sections 117, 118, 123 and 124 must be read together; the cap may be exceeded only in the specific circumstances identified by section 124 (for example, where the section 114(2)(a) figure itself exceeds the cap or other statutory exceptions apply). The Employment Appeal Tribunal's conclusion allowing the employer's appeal was correct.

Employment Tribunal found unfair dismissal (7 May 2003) and ordered reinstatement with quantified section 114(2)(a) sum; Employment Appeal Tribunal (His Honour Judge JR Reid QC et al.) allowed the employer's appeal on the ground that the section 114(2)(a) element is subject to the statutory cap; appeal to the Court of Appeal [2004] EWCA Civ 1563 dismissed.