Employers face paying more than the statutory cap for unfair dismissal compensation in some cases, following a ruling of the Scottish EAT in Dafiaghor-Olomu v Community Integrated Care.
The statutory cap on unfair dismissal compensatory awards (the lower of 52 weeks' pay and, currently, £93,878) applies to the overall assessment of compensation after 'taking into account' any payment made by the employer to the employee in respect of the subject matter of the claim. The Scottish EAT has ruled that, where a compensatory award ordered by the tribunal was paid by the employer but the employee then appealed the remedy, and at the second remedies hearing the tribunal calculated compensation at a higher amount well above the cap, the original sum paid should be deducted before applying the statutory cap. The employer argued that the cap should be applied first and the amount already paid then set off; the EAT had sympathy for the employer's position but felt constrained by the statutory wording to reject this argument. As a result, the employer ended up paying the statutory cap plus the amount of the initial award.
Absent this decision being overturned or legislative reform, employers can therefore be penalised if they pay a first award promptly, only for it to be successfully appealed. Where the claimant could potentially be awarded loss significantly in excess of the statutory cap, employers may wish to consider not paying the original award within the required 14 days and seeking a stay of any enforcement proceedings pending appeal. However, interest would continue to be payable (currently at 8% pa) from the day after the original decision.
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