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 ICR 596, Court of Appeal - Ian Truscott QC
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An Employment Appeal Tribunal, when considering the loss suffered by an unfairly dismissed employee, had made an error of principle in distinguishing between loss of a final salary pension scheme and other remuneration benefits. Pensions did not have special status in the calculation and had to be translated into money terms, in the same way as other aspects of a remuneration package, in accordance with the principle in Dench v Flynn & Partners (1998) IRLR 653.
The appellant employer (X) appealed against the dismissal of its appeal (Roberts v Aegon UK Corporate Services Ltd (2009) Pens LR 105) against the upholding of a decision that it was appropriate to distinguish between pension loss and other benefits within a remuneration package where the respondent former employee (R) had been a member of a final salary pension scheme. The employment tribunal had found that R had been unfairly dismissed by X and had been required to calculate the losses arising. R had obtained employment with another company (J) immediately after the dismissal. While she had had a better remuneration package with J than with X, the pension scheme had been less favourable, being a money purchase scheme not a final salary scheme. R's employment with J had lasted only eight months, ending six months before the instant remedies hearing. In calculating the compensation award, the tribunal had concluded that R's employment with J had broken the chain of causation for the purposes of calculating loss of earnings due from X. It had however found that the final salary pension scheme offered by X was a unique type of benefit, which was unlikely to be offered in any other employment, and that although the loss could be reduced by obtaining the benefit of a money purchase scheme, there was a continuing pension loss attributable to the unfair dismissal. X appealed against the award on the basis that the tribunal should not have separated the issues of earnings and pension and that R's overall remuneration package from J offset her less favourable pension arrangements. The Employment Appeal Tribunal found that the benefit of a final salary pension scheme was an unquantifiable loss that justified it being treated differently. At the instant appeal, X repeated its argument that there was no basis for distinguishing the various heads of compensation and giving pension a special status. R submitted that fresh permanent employment did not necessarily break the chain of causation and it did not have to do so for all purposes and in relation to each benefit. She maintained that it was a matter for the tribunal to assess the treatment of each aspect of remuneration.
HELD: The tribunal's finding on causation meant that X were not to be liable for the loss of remuneration continuing after the contract with J came to an end. The tribunal had chosen not to apply that principle to the pension loss. There was no legitimate reason for isolating pensions for special treatment. Pensions did not have special status in the calculation; they were essentially deferred remuneration and had to be assessed accordingly. A tribunal could not avoid translating pension values into money terms. Even though it was often a difficult and highly speculative exercise, the calculation nevertheless had to be performed. The tribunal had made an error of principle and reached a perverse conclusion. If it had applied the principle in Dench v Flynn & Partners (1998) IRLR 653 CA (Civ Div) to the whole of the remuneration package, it would necessarily have concluded that there was no loss arising out of the change in pension arrangements, Dench applied and Bentwood Bros (Manchester) Ltd v Shepherd (2003) EWCA Civ 380, (2003) ICR 1000 considered.