When Will the Employment Appeal Tribunal Interfere with Compensation or Remedy Decisions?

The Employment Appeal Tribunal will interfere with a compensation or remedy decision where the Employment Tribunal made an error of law in its approach to the assessment of compensation or the formulation of remedy. Under section 21 of the Employment Tribunals Act 1996, the EAT's jurisdiction extends to remedy decisions in the same way as liability decisions. The tribunal must correctly apply the relevant statutory framework, take into account all relevant matters, exclude irrelevant ones, and provide adequate reasons for its conclusions on remedy.

Common errors of law in remedy decisions include: misapplication of the statutory cap on compensation, failure to apply the Polkey v AE Dayton Services Ltd [1988] ICR 142 principles correctly, errors in the calculation of loss, failure to apply the duty to mitigate, incorrect uplift or reduction for failure to follow the ACAS Code of Practice, errors in the assessment of injury to feelings, and failure to make a Chagger v Abbey National plc [2010] ICR 397 deduction where appropriate. The Employment Appeal Tribunal will also interfere where a remedy decision is perverse or inadequately reasoned.

Legal Framework

Unfair Dismissal Compensation

Compensation for unfair dismissal is governed by sections 118 to 127A of the Employment Rights Act 1996 and comprises a basic award and a compensatory award. The compensatory award is assessed on the basis of what is just and equitable in all the circumstances, having regard to the loss sustained by the complainant. The Employment Appeal Tribunal will interfere where the tribunal erred in calculating the basic or compensatory award, for example by applying the wrong date for the statutory cap, by failing to deduct sums that should have been deducted, or by awarding loss that was not attributable to the dismissal.

The Polkey reduction is a common source of appeal. Where there was a procedural deficiency in the dismissal but the employer contends that the employee would have been dismissed in any event had a fair procedure been followed, the tribunal must assess the percentage chance that the employee would have been dismissed and reduce the compensatory award accordingly. A failure to address the Polkey question, or an error in the assessment, is an error of law.

Discrimination Compensation

Compensation for discrimination is governed by section 124 of the Equality Act 2010 and is assessed on the tortious measure — that is, the claimant is to be put in the position they would have been in had the discrimination not occurred. There is no statutory cap on discrimination compensation. The Employment Appeal Tribunal will interfere where the tribunal erred in its assessment of financial loss, injury to feelings, aggravated damages, or interest.

The assessment of injury to feelings is guided by the Vento v Chief Constable of West Yorkshire Police [2003] ICR 318 bands, as updated by the Presidents of the Employment Tribunals. The bands provide a framework for assessing the appropriate level of compensation for injury to feelings. An award that falls outside the relevant band without adequate justification may be challenged on appeal as an error of law or as perverse.

Mitigation of Loss

The duty to mitigate loss applies to both unfair dismissal and discrimination compensation. The claimant must take reasonable steps to mitigate their loss, and the Employment Tribunal must assess whether the claimant has done so. The burden of proving a failure to mitigate lies on the respondent.

The Employment Appeal Tribunal will interfere where the tribunal misapplied the mitigation principles — for example, by imposing an unreasonable standard of mitigation, by placing the burden on the claimant to prove that they mitigated, or by failing to assess mitigation at all. A failure to address mitigation where it was raised as an issue constitutes an error of law.

ACAS Code Uplift and Reduction

Under section 207A of the Trade Union and Labour Relations (Consolidation) Act 1992, the Employment Tribunal may increase or decrease any award by up to 25% where either party has unreasonably failed to comply with the ACAS Code of Practice on Disciplinary and Grievance Procedures. The Employment Appeal Tribunal will interfere where the tribunal applied the uplift or reduction to the wrong component of the award, failed to consider the Code where it was applicable, or assessed the percentage adjustment on the basis of an error of law.

The Chagger Deduction

In Chagger v Abbey National plc [2010] ICR 397, the Court of Appeal held that in discrimination cases where the claimant was dismissed, the tribunal should consider the chance that the claimant would have been dismissed in any event, even in the absence of discrimination. This is the discrimination equivalent of the Polkey reduction. A failure to apply the Chagger principles where they were in issue is an error of law.

Common Errors and Misconceptions

A common misconception is that the Employment Appeal Tribunal will readily interfere with the amount of compensation awarded. The EAT gives considerable latitude to the Employment Tribunal in the assessment of compensation, recognising that the quantification of loss involves evaluative judgments. The EAT will not interfere merely because it would have assessed the compensation differently.

However, the EAT will interfere where there is an error of principle in the assessment. This includes applying the wrong legal framework, failing to take a mandatory step in the calculation, or reaching a figure that is so far outside the range of reasonable assessments as to be perverse. The distinction between an evaluative difference and an error of principle is the key to understanding when the EAT will intervene.

Another error is to assume that a Polkey reduction must always be made. The tribunal has a discretion. Where it concludes that the employee would not have been dismissed had a fair procedure been followed, a 100% chance of continued employment — and no Polkey reduction — is a permissible finding. The error of law arises where the tribunal fails to address the Polkey question at all, not where it addresses it and reaches a particular conclusion.

Some parties challenge injury to feelings awards by reference to the Vento bands without recognising that the bands provide a range, not a fixed amount. An award within the appropriate band is unlikely to be overturned on appeal. An award that falls outside the band may be challenged, but the tribunal may justify a departure from the band if it provides adequate reasons.

A further misconception is that the Employment Appeal Tribunal will recalculate the compensation itself. In most cases, if the EAT finds an error in the remedy assessment, it will remit the case to the Employment Tribunal for a fresh assessment applying the correct principles. Substitution of the EAT's own figures is rare and occurs only where the facts are clear and the correct figure can be determined without further evidence.

Practical Application

When reviewing a remedy decision for potential errors of law, the analysis should work through each component of the award systematically. For unfair dismissal, this includes the basic award, the compensatory award, the Polkey reduction, the application of the statutory cap, any ACAS Code adjustment, and the assessment of contributory fault. For discrimination, it includes financial loss, injury to feelings, aggravated damages, interest, and any Chagger deduction.

At each stage, the question is whether the tribunal applied the correct legal framework and whether its assessment was adequately reasoned. An error at any stage may ground an appeal, but the error must be material. An error in a minor component of the award that does not significantly affect the total is unlikely to warrant an appeal.

Grounds of appeal on remedy should identify the specific error in the assessment, the correct legal principle, and the impact on the award. The sift judge can then assess whether the error is arguable without needing to review the underlying evidence in detail.

Strategic considerations are particularly important in remedy appeals. An appeal that succeeds on a single component of the compensation will result in a remission on that component only. The costs and time involved in an appeal should be weighed against the financial impact of the error. An appeal over a minor component of a large award may not be proportionate.

Process and Timing

The 42-day time limit runs from the date the remedy decision (or the written reasons for it) was sent. Where liability and remedy are decided in separate hearings, the time limit for appealing the remedy decision runs from the date the remedy reasons are sent, not from the liability decision.

Remedy appeals may involve detailed financial calculations. The Employment Appeal Tribunal expects the parties to have identified the specific error and its financial impact. A schedule of loss showing the correct calculation, compared with the tribunal's calculation, can be a helpful tool in presenting the appeal.

If the appeal succeeds, the Employment Appeal Tribunal will usually remit the remedy to the Employment Tribunal for a fresh assessment applying the correct legal principles. The scope of the remission depends on the nature of the error. If the error affects only one component, the remission may be limited to that component. If the error is more fundamental, a complete reassessment may be required.

When to Seek Specialist Counsel

Remedy appeals require a combination of legal knowledge and financial analysis. A specialist in Employment Appeal Tribunal work can identify errors of principle in the assessment, distinguish between evaluative differences and legal errors, and present the appeal in a way that focuses on the error rather than on the amount. This is an area where specialist input is particularly valuable because the line between a permissible evaluative judgment and an error of law is often fine.

A specialist can also advise on proportionality — whether the financial significance of the error justifies the cost and time of an appeal. This assessment ensures that the party's resources are directed to appeals that are likely to produce a meaningful result.

Frequently Asked Questions