Employment Rights Act 1996, section 123

Compensatory award

Part X Unfair dismissal

(1)Subject to the provisions of this section and sections 124 [F815, 124A and 126F815] , the amount of the compensatory award shall be such amount as the tribunal considers just and equitable in all the circumstances having regard to the loss sustained by the complainant in consequence of the dismissal in so far as that loss is attributable to action taken by the employer.

(2)The loss referred to in subsection (1) shall be taken to include—

(a)any expenses reasonably incurred by the complainant in consequence of the dismissal, and

(b)subject to subsection (3), loss of any benefit which he might reasonably be expected to have had but for the dismissal.

(3)The loss referred to in subsection (1) shall be taken to include in respect of any loss of—

(a)any entitlement or potential entitlement to a payment on account of dismissal by reason of redundancy (whether in pursuance of Part XI or otherwise), or

(b)any expectation of such a payment,

only the loss referable to the amount (if any) by which the amount of that payment would have exceeded the amount of a basic award (apart from any reduction under section 122) in respect of the same dismissal.

(4)In ascertaining the loss referred to in subsection (1) the tribunal shall apply the same rule concerning the duty of a person to mitigate his loss as applies to damages recoverable under the common law of England and Wales or (as the case may be) Scotland.

(5)In determining, for the purposes of subsection (1), how far any loss sustained by the complainant was attributable to action taken by the employer, no account shall be taken of any pressure which by—

(a)calling, organising, procuring or financing a strike or other industrial action, or

(b)threatening to do so,

was exercised on the employer to dismiss the employee; and that question shall be determined as if no such pressure had been exercised.

(6)Where the tribunal finds that the dismissal was to any extent caused or contributed to by any action of the complainant, it shall reduce the amount of the compensatory award by such proportion as it considers just and equitable having regard to that finding.

[F816 (6A)Where—

(a)the reason (or principal reason) for the dismissal is that the complainant made a protected disclosure, and

(b)it appears to the tribunal that the disclosure was not made in good faith,

the tribunal may, if it considers it just and equitable in all the circumstances to do so, reduce any award it makes to the complainant by no more than 25%.F816]

(7)If the amount of any payment made by the employer to the employee on the ground that the dismissal was by reason of redundancy (whether in pursuance of Part XI or otherwise) exceeds the amount of the basic award which would be payable but for section 122(4), that excess goes to reduce the amount of the compensatory award.

[F817 (8)Where the amount of the compensatory award falls to be calculated for the purposes of an award under section 117(3)(a), there shall be deducted from the compensatory award any award made under section 112(5) at the time of the order under section 113.F817]

Definitions used in section 123 5

action

“act” and “action” each includes omission and references to doing an act or taking action shall be construed accordingly,

Defined in s.235(1) · see it in the full Act
employer

(4) In this Act “employer”, in relation to an employee or a worker, means the person by whom the employee or worker is (or, where the employment has ceased, was) employed.

Defined in s.230(4) · see it in the full Act

(6) This section has effect subject to sections 43K , 47B(3) and 49B(10) ; and for the purposes of Part XIII so far as relating to Part IVA or section 47B, “worker”, “worker’s contract” and, in relation to a worker, “employer”, “employment” and “employed” have the extended meaning given by section 43K.

Defined in s.230(6) · see it in the full Act
strike

(5) In sections 91(2), 140(2) and (3), 143(1), 144(2) and (3), 154 and 216(1) and (2) and paragraph 14 of Schedule 2 “strike” means—

(a)the cessation of work by a body of employed persons acting in combination, or

(b)a concerted refusal, or a refusal under a common understanding, of any number of employed persons to continue to work for an employer in consequence of a dispute,

Defined in s.235(5) · see it in the full Act
employee

(1) In this Act “employee” means an individual who has entered into or works under (or, where the employment has ceased, worked under) a contract of employment.

Defined in s.230(1) · see it in the full Act
protected disclosure

“protected disclosure” has the meaning given by section 43A,

Defined in s.235(1) · see it in the full Act

In this Act a “protected disclosure” means a qualifying disclosure (as defined by section 43B) which is made by a worker in accordance with any of sections 43C to 43H.

Defined in s.43A · see it in the full Act

Cases considering section 123 228

Eastwood and another (Appellants) v. Magnox Electric plc (Respondents). McCabe (Respondent) v. Cornwall County Council and others (Appellants)

[2004] UKHL 35 · 15 July 2004Interprets

Lord Steyn considered that this provision permits compensation for financial loss but not non-pecuniary loss. That conclusion removed one support for Johnson's assumption of substantial overlap between the statutory and proposed common-law remedies (see Lord Steyn, discussion of Dunnachie).

Dunnachie (Respondent) v. Kingston-upon-Hull City Council (Appellants)

[2004] UKHL 36 · 15 July 2004Limits

The provision confines compensatory awards for unfair dismissal to economic loss attributable to the dismissal. Its just-and-equitable criterion provides flexibility in assessing that loss but does not authorise compensation for injury to feelings or other non-pecuniary harm (see Lord Steyn, section “The interpretation of section 123”). The provision's elaboration of recoverable loss reinforces the conclusion that section 123 concerns economic loss and contains no provision for non-economic harm (see Lord Steyn, section “The interpretation of section 123”). Cited only.

Johnson (AP) v. Unisys Limited

[2001] UKHL 13 · 22 March 2001Interprets

The compensatory award may cover loss sustained in consequence of dismissal and attributable to the employer’s action. The majority regarded psychiatric-injury-related financial loss as falling within that jurisdiction; Lord Hoffmann also considered that “loss” was not necessarily confined to financial loss (see paras [52]-[56]). The tribunal may reduce the compensatory award to reflect the complainant’s contribution to dismissal. The provision had been used to reduce the employee’s award by 25% and illustrated a statutory restriction absent from common law damages (see paras [53]-[54]).

208 more judgments, and what each says about section 123, are in the case-law panel in the full Act.

Amendments and notes

4 notes from legislation.gov.uk

Amendments

  1. F815Words in s. 123(1) substituted (1.10.2004) by Employment Act 2002 (c. 22), ss. 53, 55(2), Sch. 7 para. 39; S.I. 2004/2185, art. 2
  2. F816S. 123(6A) inserted (25.6.2013) by Enterprise and Regulatory Reform Act 2013 (c. 24), ss. 18(5), 103(2) (with s. 24(6))
  3. F817S. 123(8) inserted (1.10.2004) by Employment Act 2002 (c. 22), ss. 34(5), 55(2); S.I. 2004/1717, art. 2(2) (subject to art. 3)

Modifications

  1. C143S. 123 applied (1.11.1998) by 1998 c. 39, s. 24(4)(b)