NSM Music Ltd v McArdle

In an unfair-dismissal compensation assessment, a tribunal must distinguish reasonable mitigation from a voluntary career change. Where an employee retrains after dismissal, the tribunal should make sufficient findings about the labour market, the employee’s skills, the availability of comparable work, and the time reasonably required to obtain it. A conclusion that retraining was reasonable, without those findings, may be inadequate.

The Polkey approach may still apply where dismissal would have occurred following a fair procedure only as a percentage possibility. A finding of contributory fault does not remove the need to consider that issue where it is realistically raised.

The employee was dismissed after making an offensive mock disc concerning a customer. The Employment Tribunal found that the employer lacked an honest belief in the alleged misconduct and that the decision to dismiss had effectively been made before the disciplinary hearing. It nevertheless found the dismissal unfair, reduced compensation for contributory conduct, and awarded future loss while the employee retrained to become a teacher.

The employer appealed on the statutory procedure, the application of Polkey, and compensation. The employee cross-appealed, arguing that a pre-determined dismissal could not comply with the statutory disciplinary procedure. The central issues were whether the procedure depended on the employer’s mindset and whether the findings adequately established that teacher training was reasonable mitigation.

1. Cross-appeal dismissed. The statutory disciplinary provisions in Part 1 of the Employment Act 2002 concerned procedural form, not the employer’s state of mind. A decision to dismiss, before the disciplinary hearing, remained capable of being revoked until implemented. The Tribunal therefore did not err in finding compliance with the statutory procedure, although the pre-determined decision was highly relevant to whether the dismissal was fair.
2. The Tribunal’s finding that the dismissal was unfair under section 98(4) of the Employment Rights Act 1996 was open to it on the evidence. Its conclusion under section 98A(2) was expressed shortly but was legally sustainable.
3. The Tribunal was entitled to make a reduction for contributory conduct. However, where there was a realistic possibility that a fair procedure might nevertheless have led to dismissal, the Polkey exercise could remain relevant. A probability exceeding 50 per cent engages section 98A(2), but a lesser percentage chance may still justify a compensation reduction under Polkey.
4. The appeal on compensation was allowed in part. The Tribunal had not made sufficiently particular findings to show whether retraining as a teacher was a realistic response to the employment market or a decision to pursue a new career. It should have addressed the employee’s skills, the extent of his search for comparable work, local employment conditions, and the likely period before such work could have been obtained.
5. The finding of unfair dismissal and the reduction for contributory conduct were undisturbed. The compensation issue, particularly the period of loss attributable to teacher training and qualification, was remitted to the same Tribunal for reconsideration.

• Employment Appeal Tribunal: Allowed the employer’s appeal only on the compensation issue, dismissed the employee’s cross-appeal, and remitted compensation to the same Employment Tribunal.
• Leeds Employment Tribunal: On 7 September 2009 found unfair dismissal, reduced compensation for contributory conduct, and awarded future loss during retraining.