Davies v Dl Insurance Services Ltd (REDUNANCY)

Under section 116(3) of the Employment Rights Act 1996, a tribunal must make an express, evidence-based assessment of whether an employer can practicably comply with a re-engagement order. Practicability means capable of successful implementation. It is not defeated merely because the employee needs training or is not the employer’s preferred candidate.

A compensatory award under section 123 must reflect the loss actually sustained. A tribunal must therefore use a consistent gross or net basis when offsetting mitigation earnings. In assessing a Polkey reduction, it must take account of all reliable evidence, including its liability findings and the employer’s burden of showing that dismissal might fairly have occurred.

The Claimant was found by the Liverpool Employment Tribunal to have been unfairly dismissed for redundancy. At the remedy hearing, the Tribunal declined to order re-engagement, assessed compensation, and applied a 50% Polkey reduction.

The Claimant appealed three aspects of the Remedy Judgment: the refusal of re-engagement, the calculation of compensation, and the assessment of the Polkey reduction. The central issue was whether the Tribunal had applied the statutory tests and properly used its earlier liability findings when determining remedy.

1. Appeal allowed. The Remedy Judgment was set aside on the issues of re-engagement, compensation and the Polkey reduction. The case was remitted to the same Employment Tribunal.

2. On re-engagement, section 116(3) of the Employment Rights Act 1996 required the Tribunal to consider whether it was practicable for the Respondent to comply with an order. The Tribunal’s reasons neither identified nor properly applied that question. It wrongly elided the prior question whether to make an order with the later question, under section 116(4), of the order’s terms.

3. There was evidence that the Claimant could undertake an available Project Manager role, although he might require training. The Respondent’s view that he was not the best candidate did not establish that re-engagement was impracticable. Commercial preference was relevant only insofar as it bore on practicability. Considering a specific available role was permissible; the error was treating the employer’s preference as decisive.

4. Under section 123(1), compensation had to reflect loss sustained and be just and equitable. The Tribunal erred by deducting the Claimant’s gross mitigation earnings from a net calculation of earnings lost. That inconsistent method did not calculate the actual loss.

5. The 50% Polkey reduction was also unsustainable. The Tribunal had previously found that, on objective criteria, the Claimant was the better candidate. It did not explain why a 50% chance of dismissal nevertheless followed merely because two employees remained in the pool. The Respondent bore the burden of producing relevant evidence, and the Tribunal had to consider all reliable material, including its liability findings.

6. Remittal to the same Tribunal was appropriate. Its errors did not amount to a wholesale flaw undermining confidence in it. Any re-engagement decision would be made on evidence current at the remitted hearing.

• Employment Appeal Tribunal: Allowed the Claimant’s appeal and remitted the remedy issues to the same Tribunal.
• Liverpool Employment Tribunal: Found the Claimant unfairly dismissed for redundancy, but refused re-engagement and made a compensatory award subject to a 50% Polkey reduction.