Brown v Colt Technology Services Limited

An employee may fall within the insurance exception to the rule against recovering avoided loss where the evidence shows an indirect contribution to insurance premiums. A choice under a flexible-benefits scheme to receive lower salary in return for enhanced permanent health insurance may constitute such a contribution.

A claimant who remains employed has not lost redundancy or notice payments which may still become payable. Awarding those sums would compensate avoided loss twice.

In psychiatric-injury cases, apportionment requires a tribunal first to decide whether the harm, rather than the causative events, is divisible. If it is, the tribunal must identify a rational basis for allocating the harm caused by the employer’s wrongdoing.

The claimant remained employed by the respondent but had been absent through incapacity since 2012. An Employment Tribunal upheld some disability discrimination, harassment and reasonable-adjustment claims under the Equality Act 2010. At a remedies hearing it awarded compensation, including future loss, and apportioned losses 70% to discriminatory causes and 30% to other causes.

Both parties appealed the remedies judgment of 18 October 2016. The issues included deductions for permanent health insurance (PHI), redundancy and notice payments, the anticipated cessation of PHI, future recovery and earnings, relapse, and the correct approach to apportionment of psychiatric harm.

1. Appeal and cross-appeal allowed in part. The Tribunal was entitled to deduct only the compulsory 50% PHI element. The claimant had elected to receive less salary in exchange for 75% cover. That was evidence capable of establishing an indirect contribution to the cost of the enhanced insurance, within Gaca v Pirelli General plc [2004] 1 WLR 2683.

2. The award of redundancy and notice payments was erroneous. Although the claimant would probably have been made redundant in 2013 had he been fit, he remained employed. He had therefore not lost either the payments or the chance of receiving them, and might still receive them. Their award would create double recovery. This differed from a discriminatory-dismissal case in which a non-discriminatory redundancy would have followed.

3. The Tribunal’s prediction that PHI payments could cease while the claimant remained unable to work was unsupported speculation. The insurer had no contractual power to compel dismissal or withhold accepted benefits on that basis. Further, an employer operating PHI conditional on continuing employment is subject to an implied term not to terminate the employment while the employee remains incapacitated, as recognised in Aspden v Webbs Poultry and Meat Group (Holdings) Ltd [1996] IRLR 521. The finding at paragraph 46.3 of the remedies judgment was deleted. The separate finding that the claimant would return to work when fit remained intact.

4. The Tribunal was entitled to make broad findings about recovery, future earnings and the effect of relapse. A best estimate of the period of loss may incorporate contingencies, including the risk of relapse, without a separate percentage calculation.

5. The 70/30 apportionment could not stand. The Tribunal divided discriminatory and non-discriminatory events, whereas BAE Systems (Operations) Ltd v Konczak [2017] EWCA Civ 1188 requires an inquiry into whether the claimant’s harm is divisible and, if so, what part is attributable to the employer’s wrong. The case was remitted to the same Tribunal to determine that issue and recalculate compensation and interest.

• Employment Appeal Tribunal: Appeal and cross-appeal allowed in part. The remedies award was varied and remitted to the same Tribunal for apportionment and recalculation.
• Employment Tribunal: Liability judgment in August 2014 upheld some claims. The remedies judgment of 18 October 2016 awarded compensation following a September 2015 remedies hearing.