Burlo v Langley & Anor

Under section 123 of the Employment Rights Act 1996, compensation for unfair dismissal must reflect economic loss attributable to the dismissal. The words just and equitable allow flexibility in calculating that loss, but do not authorise a bonus or double recovery.

The narrow principle in [1972] ICR 501 remains applicable: earnings from alternative employment during the notice period are not ordinarily deducted. That principle cannot be extended to create compensation for a wider concept of good employment practice where the result exceeds actual loss. For an employee absent through sickness, SSP may therefore be the proper measure of notice-period loss.

The appellant worked as a nanny under a contract providing eight weeks’ notice and SSP during sickness. After an argument, she was dismissed while absent following a car accident.

The Employment Tribunal upheld claims for wrongful and unfair dismissal. The Employment Appeal Tribunal, in UKEAT/0572/05/ZT, reduced the wrongful-dismissal award to SSP and dismissed the employee’s cross-appeal concerning compensation for unfair dismissal.

The central issue was whether compensation under section 123 of the Employment Rights Act 1996 could be calculated by reference to full-rate notice pay based on good employment practice, notwithstanding that the employee would have received only SSP.

Appeal dismissed. Smith LJ delivered the leading judgment. Leveson LJ and Mummery LJ agreed. The Employment Appeal Tribunal had reached the correct result on the cross-appeal, although its reasoning required correction.

1. Statutory measure of compensation. Section 123 requires compensation for loss attributable to the dismissal. The just and equitable wording gives tribunals flexibility in calculating economic loss; it does not permit an award exceeding that loss or create a bonus or double recovery.
2. Norton Tool. The ratio of Norton Tool was the narrow principle that an employee dismissed without proper notice or pay in lieu is ordinarily entitled to the wages for the proper notice period without credit for earnings from alternative employment during that period. The wider formulation concerning compensation for departures from good industrial practice was obiter.
3. Babcock. Babcock established that the narrow principle could not be extended where this would produce compensation greater than actual loss. Its discussion of the correctness of the narrow principle was obiter, but its restriction of the principle and rejection of double recovery formed part of its ratio.
4. Application. Even assuming that good employment practice required full-rate notice pay for an employee absent through sickness, the employee’s actual loss was SSP, because that was what she would have received had she not been dismissed. The wider Norton Tool principle could not support recovery of full wages.
5. Further observations. Obiter, the court expressed reservations about treating full-rate pay as a general good-industrial-practice requirement outside section 88 of the Employment Rights Act 1996, or using good practice to create new bases of recoverable loss. The narrow Norton Tool principle remained applicable unless displaced by a directly relevant later decision.

• Court of Appeal (Civil Division) [2006] EWCA Civ 1778: dismissed the employee’s appeal from the Employment Appeal Tribunal.
• Employment Appeal Tribunal UKEAT/0572/05/ZT: allowed the employers’ appeal on wrongful-dismissal damages, reducing the award to eight weeks’ SSP, and dismissed the employee’s cross-appeal on unfair-dismissal compensation.
• Employment Tribunal: upheld the wrongful- and unfair-dismissal claims and made awards for wrongful dismissal and compensation for unfair dismissal.