Calculating reduction of unfair dismissal compensation on a failure to mitigate (Hakim v The Scottish Trades Union Congress)

A person bringing a claim of unfair dismissal is under a duty to mitigate their loss. If the respondent proves that the claimant should have regained employment earlier than they did, and hence has failed to mitigate their loss, then normally the tribunal should reduce compensation by reference to a date by which employment should have been regained. The compensatory award should only instead be reduced on a percentage basis, in relation to failure to mitigate, if a more precise assessment cannot be made (for example because there is a lack of evidence of the prospects of alternative employment or of the wages that employment would attract), according to the EAT.

Hakim v The Scottish Trades Union Congress (UKEATS/0047/19/SS)

What are the practical implications of this judgment?

This judgment by Lord Summers sheds light on the assessment of a compensatory award for unfair dismissal. It confirms that if compensation is to be ‘just and equitable’ it must be logical and that, in relation to mitigation of loss, tribunals should usually follow the steps that are set out in Gardiner-Hill:

• identify what steps should have been taken by the claimant to mitigate their loss;
• find the date upon which such steps would have produced an alternative income;
• thereafter reduce the amount of compensation by the amount of income which would have been earned.

It should be noted that Lord Summers describes a broad percentage basis reduction as a ‘crude’ approach which should only be used if a more precise assessment cannot be made (for example because there is a lack of evidence of the prospects of alternative employment or of the wages that employment would attract).

This judgment also comments on deductions for contributory fault under section 123(6). It confirms that section 123(6) is intended to recognise that an employee may be partially to blame for the dismissal that gives rise to the claim but has no application to the circumstances in which subsequent employments come to an end and may not be used to restrict the quantum of loss in that way. A respondent cannot therefore seek a percentage reduction in a compensatory award by arguing that the claimant was at fault in losing a new job that they obtained.

Case details

• Court: Employment Appeal Tribunal
• Judge: Lord Summers
• Date of judgment: 19 January 2021

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