National Westminster Bank Plc v Parry

On an employer’s complete failure to comply with a reinstatement order, the sum specified for pre-reinstatement pay and benefits under section 114(2)(a) of the Employment Rights Act 1996 is not a free-standing award. It forms part of the compensatory award for unfair dismissal and is subject to the statutory cap.

Section 124(4) permits the cap to be exceeded only so far as necessary to ensure that the relevant statutory amount is fully reflected. It does not generally ring-fence that amount from the cap. Perceived unfairness to an employee who cannot recover all proven loss cannot justify a construction inconsistent with clear statutory language.

The employee had worked for the bank for 33 years before his dismissal. An Employment Tribunal found the dismissal unfair and, at the remedies stage, ordered reinstatement despite the bank having stated that it would not comply.

The Tribunal awarded a basic award, a capped compensatory award, an additional award, and arrears of pay and benefits for the period from dismissal to the proposed reinstatement date. The Employment Appeal Tribunal allowed the bank’s cross-appeal, holding that the arrears formed part of the compensatory award and were subject to the statutory cap.

The employee appealed. The sole issue was whether the amount specified under section 114(2)(a) of the Employment Rights Act 1996 was ring-fenced from that cap.

Appeal dismissed. Maurice Kay LJ, with whom Gage and Mummery LJJ agreed, held that the Employment Appeal Tribunal had correctly applied the statutory scheme.

1. An order for reinstatement requires the tribunal to specify the pay, benefits and arrears payable for the period between dismissal and reinstatement under section 114(2)(a) of the Employment Rights Act 1996. Where reinstatement is wholly not complied with, that sum is not recoverable as a separate head outside the compensation regime. It forms part of the compensatory award payable under section 117(3)(a).

2. The compensatory award is calculated under section 123 and is ordinarily subject to the statutory cap in section 124. Section 124(4) creates a limited exception. It permits an excess only to the extent needed for the compensatory and additional awards to reflect the amount specified under section 114(2)(a).

3. If the section 114(2)(a) amount alone exceeds the cap, the cap may be exceeded to reflect that amount fully. Other compensatory loss may nevertheless be irrecoverable. Where that amount does not itself require an excess, it is not ring-fenced from the cap.

4. The court approved the approach in Selfridges Ltd v Malek [1998] ICR 268, subsequently followed in Midland Mainline v CM Wade. The Employment Tribunal had erred by treating the section 114(2)(a) sum as a free-standing addition. The apparent arbitrariness of a statutory cap could not displace the clear statutory wording.

The appeal was dismissed, with no order for costs.

• Court of Appeal (Civil Division): dismissed the employee’s appeal from the Employment Appeal Tribunal: [2004] EWCA Civ 1563.
• Employment Appeal Tribunal: allowed the bank’s cross-appeal and held that the award for pre-reinstatement pay and benefits was subject to the statutory cap.
• Employment Tribunal: found the dismissal unfair, ordered reinstatement, and made compensation awards after the bank stated that it would not comply with reinstatement.