If you have read anything on discrimination claims or claims for whistleblowing, you may have seen references to compensation being unlimited or uncapped.
But what does this actually mean? Will an Employment Tribunal just award you any amount it thinks is fair and appropriate; or is compensation calculated in a certain way?
In this article, we look at what unlimited really means and how compensation is assessed in discrimination and whistleblowing claims.
How is compensation assessed when you have been dismissed?
Before we look at the differences between limited and unlimited compensation, let’s cover how compensation is worked out.
Compensation is a way of trying to make right some ‘harm’ (such as financial losses) that you have suffered. The idea behind it is to return you, through financial means, to the position you were in before the harm occurred.
If you have been unfairly dismissed from your job, any compensation you are entitled to will be based on your financial losses arising from the dismissal. Financial losses cover your net loss of wages, or salary, together with any benefits you received, such as pension, health care, bonuses etc.
However, following a dismissal, you are under a duty to try to reduce the losses you suffer where possible. Primarily, this means trying to find a new job, and being able to demonstrate to a tribunal that you have tried to find one.
This leads to 3 possibilities, which affect how your compensation is assessed:
- You find a new job which pays the same as, or more than, your old job – If so, your compensation will be limited to the date you started your new job – because, now that you are earning the same or more, this is the point in time where the financial losses from your dismissal end.
- You find a new job which pays less than your old job – In this situation, you will be compensated for your financial losses in full up to the time you started your new job, and then for the difference in earnings and benefits between your old job and new job.
- You are unable to find a new job, despite your best efforts – If this occurs, a tribunal will award compensation based on your full loss of earnings and benefits. They will aim to compensate you for your financial losses from the date of the dismissal to the tribunal hearing (and also for losses beyond this date if appropriate). However, often compensation is awarded on the basis of 6 – 12 months of financial loss. You are unlikely to receive compensation covering many years.
Limited and unlimited compensation
If you were unfairly dismissal and your case does not involve discrimination or whistleblowing, your compensation will be limited to a maximum figure. This will either be a year’s gross pay or a set statutory cap (whichever is the lower of the two). The statutory cap increases on 6th April of each year:
- on 6th April 2021 it was set to £89,493
- on 6th April 2022 it will increase to £93,878.
In whistleblowing and discrimination claims, these limits do not apply, which is why compensation is referred to as being uncapped or unlimited. However, it is still calculated as described in the previous section. This tends to benefit higher earners and/or those with defined benefit (such as final salary) pension schemes. This can be seen in the following example:
Louise is a doctor. She has worked for the same NHS Trust since qualifying 30 years ago. Louise raised concerns about inadequate practices for administering, recording and storing medication following a number of medication errors on the ward. Following this, she was given unfavourable shifts, refused holiday and ostracised by her colleagues. This led to her becoming ill and she resigned.
Even though Louise resigned, this still qualified as a ‘dismissal’ in her situation (for more information about how, have a look at our page on constructive dismissal).
Louise made a claim for her dismissal due to whistleblowing and she was successful.
Louise has not been able to find new work. She earned £95,000 a year with a take home pay of approximately £5,000 a month. It takes 12 months for her case to get to the Employment Tribunal. By this time, her loss of earnings is £60,000 and her pension loss (being in a defined benefit pension scheme) is estimated to be in the region of £150,000 giving a total financial loss of £210,000.
If Louise just had an ordinary unfair dismissal claim, her compensation would be limited to the statutory cap of £89,493. However, as she has a whistleblowing claim, she can claim the full amount for her losses i.e. her claim is not limited to the statutory cap.
So does unlimited mean completely unlimited?
It can certainly be beneficial that discrimination and whistleblowing claims are not affected by the limits above. But it is worth remembering that no compensation awards will ever be completely unlimited.
As mentioned before, the basic purpose of compensation is to make good the losses and harm that you have suffered. And, as such, the extent of your losses will always shape the amount of compensation you can claim and receive.
You don’t have to be dismissed to make a discrimination or whistleblowing claim
It is also worth emphasising that discrimination and whistleblowing claims can arise during an employment relationship without the employment coming to an end.
And – in a similar way to dismissal claims involving discrimination or whistleblowing – there are no compensation limits or caps which apply. As always, however, compensation will be based on the financial losses and other harm which you have suffered.
Here’s an example to illustrate:
Thandiwe is a store manager. She is black. She recently applied to be an Area Manager but was not successful with her application. Instead, the Assistant Manager at the same store, who is white, got promoted despite not having the same level of experience as Thandiwe. Thandiwe believes she did not get the role because she is black. The Group Manager, who interviewed Thandiwe for the Area Manager role, has previously criticised Thandiwe’s hair style and told her she must wear her hair up despite this not being part of the employer’s uniform policy.
From these facts, Thandiwe may have claims for direct discrimination: in relation to not receiving the promotion and having to wear her hair tied up. She may also have harassment claims.
If she is successful with her claim regarding the Area Manager role, she will be able to claim compensation for the difference in pay she would have received had she been given the higher paid role. This will be calculated up to the date of the tribunal hearing and then for such a period as the tribunal considers appropriate following that. She would also be entitled to an award for injury to feelings.
In relation to the claims regarding her hairstyle, if Thandiwe establishes that she has been discriminated against, she will be entitled to compensation – but she will not have suffered any financial loss. As such, her compensation will be limited to an award for injury to feelings.
Looking back at our earlier example, Louise would also be able to claim compensation in respect of her detrimental treatment – i.e. being ostracised, being given unfavourable shifts and having her holiday requests refused. Again, none of these resulted in financial loss but she would be entitled to claim for injury to feelings. However, she would not be entitled to injury to feelings arising out of the dismissal as this cannot be claimed in whistleblowing claims (but injury to feelings can be claimed where a dismissal is discriminatory).
- Compensation for discrimination and whistleblowing claims is based on actual financial losses for such period as the tribunal considers appropriate.
- If you have been dismissed, you are under a duty to try and find another job as soon as possible and will need to show the tribunal how you have tried to do that.
- Unlike ordinary unfair dismissal claims, the compensatory award in discrimination and whistleblowing claims is not limited or capped.
- In addition to financial losses, you can also claim an award for injury to feelings for discriminatory acts, including dismissal, and for whistleblowing detriments (but not for automatically unfair dismissal due to whistleblowing).
Can Truth Legal help you?
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From one of the UK’s most read legal blogs.