City Commercial Interiors Ltd v Michaels

An unfair-dismissal compensatory award under section 123(1) of the Employment Rights Act 1996 must compensate the employee's actual loss, but cannot permit double recovery. Loss of paid holiday entitlement may be compensated. However, where the calculation of lost earnings already includes the pay that would have been received during annual leave, and mitigation earnings contain no holiday-pay element, a separate holiday-pay award duplicates that loss. The separate award must be set aside.

The Employment Tribunal had found that the claimant was unfairly dismissed and awarded compensation for a 15-month period. He mitigated his loss through lower-paid self-employed work, which did not provide paid annual leave. The Tribunal awarded lost earnings and a separate sum for the loss of 30 days' paid holiday per year, subject to a 20% ACAS uplift.

The employer appealed from the Remedy Judgment of the London (East) Employment Tribunal, sent on 18 October 2017. The sole issue was whether the separate holiday-pay award duplicated holiday pay already included in the claimant's lost-earnings calculation.

1. Appeal allowed. The separate award for holiday pay, including its ACAS uplift, was set aside.

2. Section 123(1) of the Employment Rights Act 1996 gives an Employment Tribunal a broad discretion to make a just and equitable compensatory award for loss attributable to dismissal. Its purpose is compensation, not a bonus. A claimant cannot recover twice for the same loss.

3. Loss of paid holiday entitlement is capable of forming part of a compensatory award. The claimant had lost a valuable contractual benefit because his reasonable mitigation work was self-employed and carried no entitlement to paid leave.

4. The decisive question was whether the lost-earnings calculation already contained the sums that the claimant would have earned during the 37.5 days of paid leave within the compensable 15-month period. It did. The earnings credited from mitigation contained no sum for paid leave, while the earnings that would have been received from the employer included it.

5. The Tribunal's conclusion in principle that the claimant should be compensated for lost paid holiday was therefore already satisfied by its lost-earnings awards. Its separate holiday-pay award rested on a misunderstanding of the schedule of loss and produced double recovery.

6. No remission was required. The holiday-pay award of £3,421.86 and its 20% uplift of £684.37, totalling £4,106.23, were set aside.

• Employment Appeal Tribunal: allowed the employer's appeal and set aside the separate holiday-pay element of the compensatory award.
• London (East) Employment Tribunal: Employment Judge Goodrich, sitting alone, upheld the unfair-dismissal complaint and, in a Remedy Judgment sent on 18 October 2017, awarded compensation including a separate holiday-pay sum.