Stewart v Next Retail Ltd

A Polkey deduction is available only where unfairness arises from a procedural defect, such as failure to give an employee an opportunity to answer allegations or appeal. It is not appropriate where the dismissal is substantively unfair because the employer failed to investigate a matter going to the heart of the decision.

A Polkey deduction may be made from compensation under section 123 of the Employment Rights Act 1996. It cannot be made from the basic award under section 122(2) unless the statutory conditions for reducing that award, including contributory conduct, are satisfied.

The Employment Tribunal found that the claimant had been unfairly dismissed because the employer had failed to carry out a full and fair investigation into her medical condition, applying section 98(4) of the Employment Rights Act 1996.

The claimant obtained alternative employment, so the Tribunal awarded a basic award and £250 for loss of statutory rights but no compensatory award. It reduced the basic award by 50% on the basis that the claimant might have been dismissed in any event. The appeal concerned whether that reduction was legally available.

1. The appeal was allowed. The Tribunal’s award was set aside and the Employment Appeal Tribunal substituted an award of £4,470.46.
2. The Tribunal had applied a Polkey deduction, relying on the possibility that the claimant would have been dismissed after further investigation. Such deductions are confined to cases where the dismissal is unfair because of a procedural flaw. The examples identified included failure to give notice of the charge, failure to provide an opportunity to be heard, or failure to allow an appeal. The Tribunal’s finding here concerned a wholesale and substantive failure to investigate the claimant’s medical condition, which went to the substance of the section 98(4) assessment rather than procedure (paras [4]-[5]).
3. In any event, a Polkey deduction may be made only from compensation awarded under section 123 of the Employment Rights Act 1996. Section 122(2) contains a different power. Its just and equitable reduction of the basic award is restricted to cases involving contributory conduct by the claimant (para [6]).
4. There was no misconduct or contribution by the claimant. The Tribunal therefore had no basis to reduce the basic award. Although the loss-of-statutory-rights award was compensatory in character, no abatement was appropriate because the dismissal was substantively, rather than procedurally, unfair (para [7]).

The substituted award comprised the correctly calculated basic award of £4,220.46 and £250 for loss of statutory rights (para [8]).

• Employment Appeal Tribunal: Appeal allowed; the Employment Tribunal’s award was set aside and an award of £4,470.46 substituted.
• Employment Tribunal, Aberdeen: Found the claimant unfairly dismissed and awarded a basic award and compensation for loss of statutory rights, but reduced the basic award by 50%. The judgment was registered on 13 January 2011.