the correct approach to uplifts?

A recent Scottish case dealing with uplifts on compensatory awards has caused a stir within the ranks of employment practitioners. The case in question was the case of McKindless Group v McLaughlin heard at the Employment Appeals Tribunal (“EAT”).

This was a case relating only to the amount of the compensation award as the employer had already conceded that the dismissal was automatically unfair. The employer did not give any explanation fo its failure to follow the statutory dismissal procedure and the decision of the Employment Tribunal was therefore that an uplift of 50% of the award should be awarded to the employee. It was this finding that led to the employer’s appeal to the EAT.

The main arguments put forward by the employer’s advocate were, firstly, that the Tribunal had not taken into account the employee had given misleading evidence about the timing of when he began to operate his own business after termination of his employment and, secondly, and most importantly, the tribunal had made an error in law by not completing the necessary statutory steps required by law. Most notably, the Tribunal failed to give correct reasons as to why the uplift was set at the level that it had been. The Tribunal had suggested that one reason the uplift was so high was due to the fact that the employer had only conceded that the dismissal was automatically unfair on the eve of the hearing, thus limiting the potential for settlement beforehand. This reasoning was described as “speculative” by the EAT and insufficient reason for the uplift to exceed 10%, as the Tribunal could look at the facts and circumstances around the non-compliance but could not look beyond this at the subsequent conduct of the parties during litigation.

The EAT further found that a Tribunal would not be able to award more than a 10% uplift where no evidence had been put forward relating to the reasons for the breaches of the statutory dismissal procedure as it needed to take account of “all circumstances” when exercising the discretion entrusted upon the Tribunal to increase the amount of the uplift.

Protecting your business – how this affects you

The EAT’s decision has already been widely criticised by a number of legal commentators as it seems to have opened the door to employers to engage in various forms of dubious tactics. For example, this decision suggests that an employer who innocently breaches the procedures and sets about trying to explain the reasons why the error occurred may well be placed in a worse situation compared to an employer who dismisses without any regard to procedure and then refuses to take part in proceedings, as the latter would only ever be subjected to an uplift of 10% following the EAT’s reasoning.

The EAT’s finding that a tribunal could not look beyond the circumstances of the non-compliance also seems to have very little foundation in law as nowhere in section 31 of the Employment Rights Act 2002, which governs uplifts in compensatory awards, is the Tribunal limited to looking only at the circumstances surrounding the breach of procedure. The parties’ conduct after termination of the employment and during litigation is therefore likely to remain subject to scrutiny by most Tribunals.

As stated above, the findings of the EAT in this case should be taken with a pinch of salt, and should not be viewed by employers and their representatives as a green light to engage in questionable conduct after a claim has been brought against them by a dismissed employee. Whilst tactical considerations will always play a part in litigation between parties, reliance on this particular case could backfire as it may well be overruled in the near future.