Optimum Group Services Plc v Muir

A compensatory award for unfair dismissal under section 123 of the Employment Rights Act 1996 must compensate actual loss and must not overcompensate the claimant. A sum paid by another respondent in settlement of liability for the same dismissal is to be deducted when calculating the remaining loss, where the payment is not collateral to the dismissal.

The statutory requirement to award what is just and equitable does not confer a general discretion to permit double recovery, reward a claimant for an employer’s misconduct, or prevent an employer receiving a litigation windfall. Those matters cannot turn a compensatory award into a penalty or bonus.

The claimant was dismissed by his original employer after it incorrectly believed that his employment would transfer under TUPE. He pursued claims against the employer and several putative transferees. Before the full hearing, he settled his claim against Beaumont Electrical Ltd, a remaining putative transferee, for £20,000.

The Employment Tribunal found the dismissal unfair and awarded a basic award, holiday pay, and a compensatory award of £23,668.84 under section 123 of the Employment Rights Act 1996. It declined to deduct the Beaumont settlement, considering that it was a commercial agreement and that deduction would give the employer a windfall.

The employer appealed solely against compensation. The central issue was whether the settlement payment had to be deducted from the compensatory award.

1. Appeal allowed. The Tribunal erred in law by refusing to deduct the £20,000 paid by Beaumont from the claimant’s compensatory award.

2. Under section 123(1) of the Employment Rights Act 1996, the award is compensatory. The governing consideration is the loss actually sustained in consequence of dismissal. The words “just and equitable” operate when deciding what part of that actual loss should be awarded; they do not authorise an award exceeding the loss.

3. The rule against double recovery applied. Where a claimant seeks compensation from more than one respondent for the same loss, money already received from one must be credited against the loss recoverable from another. The Beaumont settlement arose directly from the claimant’s dismissal claim and was not a collateral receipt. It therefore had to be deducted in full.

4. The Tribunal had no discretion to allow the claimant to profit from the dismissal. In any event, its stated considerations were irrelevant: the risk assumed in settling with Beaumont, a possible windfall to the employer, and criticism of the employer’s treatment of the claimant. A section 123 award is not punitive; unlike a protective award, it does not depend on the seriousness of the employer’s default.

5. The EAT set aside the compensation judgment and substituted a compensatory award of £3,668.84, while preserving the basic award of £5,130 and holiday pay of £2,059.50. The case was remitted to the same Tribunal to recalculate and restate its recoupment certification.

• Employment Appeal Tribunal: Allowed the employer’s appeal against the compensatory award and substituted an award of £3,668.84.

• Employment Tribunal, Glasgow: By judgment registered on 4 April 2012, found the claimant unfairly dismissed and awarded compensation under section 123 of the Employment Rights Act 1996. It declined to deduct the settlement sum paid by Beaumont.