Avia Technique Ltd v Kalia

In assessing compensation for unfair dismissal, a tribunal should determine how long the employee would probably have remained employed but for the dismissal. That assessment includes the possibility of later illness or injury. Unrelated incapacity does not itself create a cut-off date for compensation.

The tribunal must instead compare the payments the employee would have received during the period of incapacity had employment continued with those actually received. A compensatory award must reflect actual loss. Where statutory sick pay received from subsequent employment equals the sick pay that former employment would have provided, no earnings loss arises for that period.

The employer appealed against a compensatory award for unfair dismissal made by the Reading Employment Tribunal. Liability for unfair dismissal, race and sex harassment, and victimisation was not challenged.

After dismissal, the employee obtained lower-paid work but became ill after a few weeks and was unable to work. The Tribunal assessed loss over 40 weeks from dismissal, crediting earnings and statutory sick pay received in the new employment. It awarded £11,070.80 for unfair dismissal, in addition to £350 for loss of statutory rights.

The appeal raised whether unrelated supervening illness required compensation to stop when incapacity began and, if not, whether the Tribunal had incorrectly awarded full former wages despite the employee receiving statutory sick pay equivalent to that which former employment would have paid.

1. Appeal allowed. The compensatory award of £11,070.80 was set aside and replaced by an award of £350 for loss of statutory rights.

2. The Employment Tribunal did not err by failing to impose a cut-off when the employee became incapable of work. The correct inquiry is the period for which the employee would have remained employed but for dismissal. That inquiry ordinarily includes the possibility that illness, injury or accident would have reduced or prevented work during that period.

3. The Tribunal must then ask what would probably have happened during that incapacity had the employment continued. If wages or salary would have continued to be paid, the resulting shortfall may be loss attributable to dismissal. The Tribunal therefore rejected the contrary approach suggested by Devine v Designer Flowers Wholesale Florists Sundries Limited [1993] IRLR 517 and preferred the commonsense, experience and justice-based approach restated in Wood v Mitchell S.A. Limited UKEAT/0018/10/CEA.

4. On the Tribunal's reasons, the 40-week period ran from dismissal. It was therefore wrong to treat the employee as losing her full former wages after she became ill. Her former contract would have provided only statutory sick pay, and she received statutory sick pay at the same rate from the new employer. There was consequently no compensable earnings loss during incapacity. The award had to be confined to the difference between actual receipts and what continued employment would have paid.

• Employment Appeal Tribunal: allowed the employer's appeal against the Reading Employment Tribunal's unfair-dismissal compensatory award, set aside the £11,070.80 award and substituted £350 for loss of statutory rights.
• Employment Tribunal: upheld claims for unfair dismissal, race and sex harassment, and victimisation. Its liability findings and the separate £10,073.14 harassment and victimisation award were not challenged.