F & G Cleaners Ltd v Saddington & Ors (Unfair Dismissal : Mitigation of loss)

Whether an employee has unreasonably failed to mitigate loss by refusing alternative work is a fact-sensitive question. The employer must show that the refusal, rather than merely the offer, was unreasonable. The tribunal may assess all material differences between the former employment and the alternative work, including employment status, pay, security, hours, trial terms and contractual benefits.

No duty to mitigate dismissal loss arises before dismissal. Where employees are treated as dismissed under Regulation 4(9) of the Transfer of Undertakings (Protection of Employment) Regulations 2006, an offer imposing materially detrimental conditions precedes that dismissal and cannot found a mitigation defence.

The claimants transferred under TUPE to the appellant following the re-tendering of a local-authority window-cleaning contract. The appellant refused to employ them on their transferred terms. It instead offered work on self-employed CIS terms, at lower daily rates, without guaranteed full-week work and subject to a trial period.

The Employment Tribunal found that the claimants had been automatically unfairly dismissed and rejected the appellant's contention that they had failed to mitigate loss by refusing the alternative work. The appellant appealed only that mitigation finding. The central issues were whether the Tribunal had wrongly relied solely on loss of statutory rights and whether a duty to mitigate had arisen when the offers were rejected.

1. Appeal dismissed. The Employment Tribunal made no error of law in finding that the claimants had not unreasonably failed to mitigate their loss.

2. The governing question was whether the employer had shown that the employees acted unreasonably in refusing the offer, applying the fact-sensitive approach stated in Wilding v British Telecommunications [2002] IRLR 524. An appellate tribunal must not substitute its own assessment for that of the Tribunal.

3. The Tribunal's reasons had to be read as a whole. Its reference to accrued statutory rights was not its sole reason. It was entitled to take account of the combined disadvantages of the proposed CIS arrangement: self-employment rather than PAYE employment, lower pay, no guarantee of a five-day week, a one-month trial period, and the absence of stated holiday or expense entitlements. Those terms were substantially less attractive than the terms which transferred under TUPE.

4. Independently, no duty to mitigate arose before dismissal. Following Savoia v Chiltern Farms [1981] IRLR 65, dismissal loss must first be sustained. On the unchallenged finding under Regulation 4(9) of the Transfer of Undertakings (Protection of Employment) Regulations 2006, the claimants could treat their contracts as terminated only after the materially detrimental offer had been made. The offers therefore preceded dismissal and could not establish a failure to mitigate.

5. The Tribunal's compensation awards consequently stood.

• Employment Appeal Tribunal: Appeal dismissed. The Tribunal upheld the Employment Tribunal's rejection of the mitigation defence.
• Employment Tribunal, East London Hearing Centre: Found a TUPE transfer, automatically unfair dismissals by the transferee, and no unreasonable failure by the claimants to mitigate loss. Its judgment was sent to the parties on 26 August 2010.