Ventrac Sheet Metals Ltd v Fairly

When assessing compensation for procedurally unfair dismissal, an Employment Tribunal must assess the chance that the employee would have been dismissed fairly in any event. This is so even where the employer’s procedural failures were serious. The assessment is compensatory, not punitive, and may involve a working hypothesis and a degree of uncertainty. The Tribunal must consider all reliable evidence, whatever its source, and is not required to decide the hypothetical outcome on the balance of probabilities. In a redundancy case, a percentage reduction may reflect the chance that the employee would have been selected. A failure to make that assessment is an error of law.

The Employment Tribunal found that the Claimant had been unfairly selected for redundancy and awarded £8,830 compensation. The Respondent’s business had suffered a severe downturn, and one of two interchangeable trainees had to be dismissed. The Tribunal treated the procedural failures as so serious that it declined to speculate about whether the Claimant would have been dismissed following a fair procedure. It also failed to assess the relative chances of selecting either trainee. The employer appealed, arguing that a Polkey deduction was required. The central issue was whether the Tribunal had erred by refusing to assess the chance of dismissal in any event.

1. Appeal allowed in part. The EAT substituted compensation of £5,740 for the Tribunal’s award of £8,830.

2. Under section 123(1) of the Employment Rights Act 1996, compensation must be just and equitable having regard to loss attributable to the employer’s action. Where the unfairness lies in procedural failures, the Tribunal must ask what would probably have happened had a fair procedure been followed, including whether dismissal would nevertheless have occurred.

3. The Tribunal may use a working hypothesis and assess chances where the evidence provides a reliable factual starting point. Speculation and uncertainty are inherent in the Polkey exercise. The evidence need not originate from the employer, and there is no burden on the employer to establish the hypothetical outcome.

4. The seriousness of the employer’s procedural failures cannot justify refusing a deduction or awarding compensation by way of punishment. The Tribunal’s reliance on the gravity of the failures and on the fact that the employer had not itself envisaged the relevant hypothesis was legally unsound.

5. On the Tribunal’s findings, one of the two trainees had to be dismissed. Factors favouring the Claimant included his longer service and reputation as a very good worker. Factors favouring the other trainee included that he was working in the workshop, where work remained available, whereas the Claimant’s on-site work had dried up. The appropriate approach was to assess the chance of dismissal, rather than decide whether the other trainee would definitely have been selected.

6. The EAT assessed that chance at 35 per cent and substituted the resulting award.

• Employment Tribunal: judgment registered on 1 September 2010; claim of unfair dismissal upheld and compensation of £8,830 awarded.
• Employment Appeal Tribunal: appeal upheld to the extent of substituting compensation of £5,740.