Reviewing the case of Polkey -v – AE Dayton Services Limited  IRLR 503
In an Employment Tribunal claim, a “Polkey deduction” is something that is capable of reducing your compensatory award in an Unfair Dismissal claim. We have provided an introduction to this which may be accessed by clicking on the link below
This blog provides a more detailed examination of the case and its implications in relation to Unfair Dismissal claims in light of subsequent case decisions.
The amount of compensation for Unfair Dismissal awarded to an employee must be that which is “just and equitable” based upon loss that arises out of an unfair dismissal. In Polkey -v- AE Dayton Services Limited  IRLR 503, the House of Lords stated that the compensatory award may be reduced or limited to reflect the fact that the employee would have been dismissed in any event and that the employer’s procedural errors accordingly made no difference to the outcome. This is commonly referred to as a Polkey deduction (or reduction).
What is the “no difference rule”?
This is an alternative name for Polkey deduction. In simple terms, it means that the Employment Tribunal have found that the dismissal was unfair due to procedural failing/s upon the part of the employer. Consequently, the Tribunal then have to reduce the amount of the compensation to reflect the possibility that there would have been a fair dismissal if the dismissal had not been procedurally unfair.
Does this mean that the unfair dismissal is rendered fair by the Polkey deduction/ “no difference rule”?
The simple answer to this is no. However, it does allow the Tribunal to make a realistic assessment of the employee’s losses according to what may have occurred in the future. The chances of the employer, not a hypothetical reasonable employer, dismissing the employee, must be assessed. This requires consideration of the employer’s likely thought processes and the evidence that would have been available to it.
When does an Employment Tribunal have to consider a Polkey deduction?
Although an Employment Tribunal is not under a general duty to investigate whether a fair dismissal may have occurred if proper procedures had been followed, it must do so if there is some concrete evidence to this effect. This involves the Tribunal using a mixture of its common sense, experience and sense of justice.
What evidence will the Employment Tribunal consider when making a Polkey deduction?
The Tribunal must consider all available evidence when making its assessment. This takes into account any evidence filed by the employer arising from cross examination of the employee’s witnesses and any evidence from the employee themselves. However, there must be at least some evidence to support a Polkey deduction, otherwise the Tribunal may refuse to make a deduction if the employer has not made any submissions, filed any evidence or cross examined any witnesses as to the period of loss.
If the employer’s behaviour is unreasonable, can the Employment Tribunal simply refuse to consider a Polkey deduction?
The employer’s behaviour is irrelevant. The employer cannot be penalised even if they have behaved badly. If there is sufficient evidence to prove a Polkey deduction, then the compensatory award will be reduced accordingly.
Nature of the reduction
There are no formal limits around the nature of a Polkey reduction. The Tribunal’s duty is to award what is just and equitable. Essentially, depending upon the facts though, a Polkey may be expressed as any of the following:
a) The Tribunal may decide that it is certain (a 100% chance) that the employee would have been dismissed by the end of a certain period (for example – a redundancy consultation period.)
b) The Tribunal may decide that the employment relationship would have continued unaffected for a specific period, but that thereafter, there was a percentage chance that the employee would have ceased to be employed.
c) The Tribunal may be unable to identify any specific period of continued employment, but instead may assess the percentage likelihood of the employment terminating.
When will the percentage reduction approach be adopted?
Usually, where an employer has failed to follow certain procedural steps which might, had they been complied with, resulted in the employee keeping their job. For example, if the Tribunal decides it was unlikely that the employee would have retained their job had proper procedures been followed, then the percentage reduction will be more significant than if the Tribunal considers that compliance with proper procedures was likely to result in the employee staying in employment.
In the situation where an employee would have been dismissed had fair procedures been complied with, then regardless of the reason for dismissal, the Tribunal will be able to determine that it is just and equitable for no compensatory award to be made. In other words, they will apply the full 100% reduction.
Limiting the period of loss
Should the Tribunal decide that a dismissal would have happened in any event had proper procedures been followed, but that it would have been delayed, a percentage reduction will not be appropriate. In this case, the compensatory award will instead reflect the period during which the employee would have remained in employment whilst the correct procedure was being complied with. For example, if an employer fails to provide an employee with a warning before dismissal, the Tribunal could decide that the employment would have continued for the warning period only, but would then have been dismissed after that.
Should an employer fail to follow a proper redundancy consultation procedure, the Tribunal can limit the compensatory award to the period of time which that proper consultation period would have covered. However, the Tribunal should also factor in the possibility of the employee being offered and accepting alternative employment during that consultation period.
Time that could have been spent looking for work
The compensatory award can also cover a longer period than just the time over which the fair consultation would have taken place even if dismissal was inevitable. For example, a failure to warn an employee of the possibility of redundancy may give rise to an award that credits the time the employee could have spent looking for alternative work had he/she been properly warned.
Where someone resigns and claims constructive dismissal, it is also possible for the Tribunal to apply a Polkey reduction.
Fair dismissal for a different reason
Furthermore, it is possible for the Tribunal to decide that, regardless of the unfair dismissal, that the employee would have been fairly dismissed for another reason shortly afterwards in any event. In this situation, the employee would still then be awarded appropriate compensation to cover the unfair dismissal.