University Of Sunderland v Drossou

For the statutory cap on compensation for unfair dismissal, a week’s pay under Employment Rights Act 1996 section 221(2) includes an employer’s pension contributions made for the employee’s benefit. The provision requires remuneration payable under the contract, not sums paid directly to the employee. The contrasting definition of wages in section 27(1), which expressly refers to sums payable to the worker, supports that construction.

Where an employee’s conduct has been found to cause or contribute to dismissal and has justified a reduction in the compensatory award, a tribunal must explain any decision not to reduce the basic award. Differing reductions will only exceptionally be justified on the same conduct.

The claimant, a senior lecturer, was dismissed following a breakdown in working relations with her line manager. The Employment Tribunal upheld her unfair-dismissal claim, ordered reinstatement, and later made financial awards after the University did not reinstate her.

In its second remedy judgment, the Tribunal included the University’s pension contributions when calculating the claimant’s week’s pay for the statutory compensatory-award cap. It reduced the compensatory award by 35% for contributory conduct but made no reduction to the basic award.

The University appealed those two remedy issues. A separate ground concerning the calculation of the statutory limit following non-compliance with a reinstatement order was not pursued.

1. The appeal was allowed in part. The challenge to the calculation of a week’s pay failed. The challenge to the unreduced basic award succeeded. The original basic award was set aside and replaced with an award of £3,904.

2. Section 221(2) of the Employment Rights Act 1996 defines a week’s pay, for an employee with fixed normal-hours remuneration, by the amount payable by the employer under the contract if the employee works those hours. It does not require that remuneration be paid to the employee. Employer pension contributions made for the employee’s benefit are remuneration and fall within that calculation.

3. The contrast with section 27(1) was decisive. For the Part II definition of wages, Parliament expressly limited the phrase to sums payable to the worker. Its omission of equivalent words from section 221(2) meant that the conventional exclusion of pension contributions could not prevail over the statutory language. The Employment Tribunal was therefore correct on this issue.

4. The Employment Tribunal’s additional reasoning that it would be illogical to include pension loss in the compensatory award but exclude pension contributions from the cap was not accepted. A compensatory award under section 123 concerns loss caused by dismissal, including non-contractual loss. The section 124 cap is instead calculated by contractual entitlement under section 221. The result nevertheless remained that pension contributions were included because they were contractual remuneration.

5. Sections 122(2) and 123(6) differ, and the assessment of the reduction is discretionary. A tribunal may in an appropriate case assess a basic-award reduction at nil. However, where it has found that the employee’s conduct caused or contributed to dismissal and has reduced compensation by 35%, it must identify why that same conduct does not justify any reduction in the basic award. No such differentiation or explanation was given. Applying RSPCA v Cruden [1986] IRLR 83, the failure was perverse.

• Employment Appeal Tribunal: Allowed the appeal only on the basic-award issue; dismissed the week’s-pay ground and treated the second ground as withdrawn and dismissed.
• Employment Tribunal: In a liability judgment sent on 18 January 2016, upheld the unfair-dismissal claim and dismissed discrimination claims. In a remedy judgment sent on 5 April 2016, ordered reinstatement. In a further remedy judgment sent on 8 August 2016, made the awards challenged on appeal.