This case is authority for the proposition that it is not obligatory for an Employment Tribunal, when assessing future loss of earnings for unfair dismissal, to set off excess past earnings against the claimed future loss.
The issue arose in the following circumstances.
a) after an unfair dismissal, an employee initially finds replacement income greater than that which she had in the previous employment
b) this then reduces such that by the time of a remedies hearing she is sustaining a monthly loss, that monthly loss continuing into the future
c) income is freelance work and is inherently insecure
d) in the period from the dismissal to the remedies hearing, because of the initial greater income, the employee has earned an excess over what she would have earned at the Respondent
As at the date of the remedies hearing, the Claimant had fully mitigated her past losses and was in fact £5,000 better off than had she remained in the employment from which she was unfairly dismissed. By that time, she was, however, sustaining a monthly loss because her inherently insecure freelance replacement work had reduced. In round terms, this ongoing loss was £500 per month. The Tribunal awarded her a year of future loss in the sum of £6,000 and refused to set off the £5,000 excess past earnings.
After examining the authorities dealing with when starting work at an excess wage can break the chain of causation, including Whelan & Another v Richardson [1998] ICR 318 and Dench v Flynn & Partners [1998] IRLR 653, the EAT held that (§19):
The authorities, therefore, indicate that there is no automatic guillotine upon a person’s continued losses compensable by a former employer when the employee takes on new work. The paradigm case is where the employee obtains permanent alternative employment paying more than the rate in the previous lost job. It follows that in a case where there is either a loss or the work obtained is not permanent, that guideline [the fifth guideline in Whelan, as modified in Dench] will not be directly applicable and thus it is understandable that a more flexible approach ... is correct.
The EAT also considered, by analogy, the personal injury case of Morris v Richards [2004] PIQR Q3.
The EAT concluded:
A tribunal may, if it is just and equitable, take an overall approach, look at all of the actual and probable losses and deduct all of the mitigation. On the other hand it may, permissibly, decide to draw a line between past and future losses and apply different tests. After all, what a tribunal is required to do is to speculate as to the future, see Scope v Thornett [2007] IRLR 155. It is an essentially different exercise from that of assessment of past losses, which can be decided as a matter of fact. As to the future, based upon an impression of what is likely to occur, the tribunal must to some extent speculate. If a tribunal decided to approach past and future losses in that different way, it would be committing no error of law in our judgment.
Finally, the EAT expressed its satisfaction that the award in the present case had been just and equitable because an ex post facto rationalisation of the figures indicated that even had the £5,000 been offset, awarding £6,000 future losses was to factor in a 20% chance that the inherently precarious replacement income would dry up altogether and not last the whole year over which future losses were awarded.
