This is a question that is considered in almost all unfair dismissal claims: whether or not there has been procedural unfairness such that a tribunal may either reduce a claimant’s award for not having followed a fair procedure, or increase a claimant’s award because the respondent didn’t follow a fair procedure. Any award made in an unfair dismissal claim usually comprises two main heads: the ‘basic award’ which is calculated using the claimant’s pay; age and number of years’ service, and a ‘compensatory award’ which considers the financial loss flowing from the dismissal: it is this head of claim that may be subject to Polkey.
If a tribunal determines that an employee may have been dismissed in any event, it can reduce the compensatory award according to that likelihood as a percentage deduction. So, it thinks a dismissal was extremely likely, the compensatory award would be reduced by a full 100%.
Though the decision of Polkey arose from a redundancy case it is a concept of much wider application and addresses the statutory question posed by s.123(1) of the Employment Rights Act 1996 (“ERA”): what compensation is just and equitable to be awarded to a Claimant?
The case reached the House of Lords, which held that procedural fairness was an integral part of the statutory test for assessing the reasonableness of the dismissal. The decision put an end to what had become known as the ‘no difference’ rule.
Lord Bridge, (163G), approved the remarks of Browne-Wilkinson J in Sillifant’s Case  IRLR 91 at 96:
“There is no need for an “all or nothing” decision if the industrial tribunal thinks there is a doubt whether or not the employee would have been dismissed, this element can be reflected by reducing the normal amount of compensation by a percentage representing the chance that the employee would still have lost his employment”.
The approach in Polkey was set out by Lord Bridge as three possibilities:
i. a finding that there was no chance of a dismissal and thus no deduction;
ii. a finding that the employee would have been dismissed in any event and thus no award of financial loss; or
iii. a finding that a dismissal was not certain but that there was a substantial chance of the same and thus the employee’s losses are reduced to reflect that possibility.
Therefore, a tribunal could and should reduce the level of compensation if the employer can show that the present outcome would have been the same, even if they had followed a fair procedure.
This principle applies in the vast majority of cases as highlighted by the Court of Appeal in Scope –and- Dr Carol Thornett  EWCA Civ 1600, when it was pointed out tribunals will often have to speculate when deciding whether a Polkey deduction should be made: Pill LJ at para 36:
“[…] The tribunal’s statutory duty may involve making such predictions and tribunals cannot be expected, or even allowed, to opt out of that duty because their task is a difficult one and may involve speculation […]”.
A tribunal should only decline to do so where circumstances are such “that one cannot sensibly reconstruct the world as it might have been”, per Lord Prosser at the EAT in the same case, where he stated, at paragraph 19:
“It seems to us that the matter will be one of impression and judgment, so that a tribunal will have to decide whether the unfair departure from what should have happened was of a kind which makes it possible to say, with more or less confidence, that the failure made no difference, or whether the failure was such that one cannot sensibly reconstruct the world as it might have been”.
In the recent case Zebrowski the EAT looked at the proper approach to a Polkey deduction.
Mr. Zebrowski won his claim for constructive unfair dismissal at the ET. The ET went on to apply a Polkey reduction to the compensation, saying:
“…if a fair procedure had been followed by the respondent there was a 60% chance that the parties would have been unable to resolve the issues relating to the claimant’s health concerns and his working environment and that the claimant’s employment would in any event have terminated fairly by way of resignation/dismissal within two months.”
Mr. Zebrowski appealed against the tribunal’s determination in respect of Polkey, on the basis that the approach taken by the ET was ambiguous.
This was an Appeal against the calculation of the Claimant’s compensation in respect of a Polkey deduction that was applied. The Appeal was allowed and remitted to the ET for it to set out, before assessing appropriate compensation, which calculation option it had used, and to thereafter assess the level of compensation accordingly.
Mr. Zebrowski argued that a finding that his employment would have continued for two months only and that there was a 60% chance of his dismissal was contradictory and impermissible.
The EAT considered that the ET Judgment was not particularly clear but it agreed that had the ET made a reduction of Mr. Zebrowski’s award to a period of 2-months, and then reduced the same by a further 60%, this was an error of law.
Laing J’s analysis at (para’s 50 to 55) refers to the approach adopted in O’Donoghue –and- Redcar & Cleveland Borough Council  EWCA Civ 701;  IRLR 615 CA in that an employment tribunal could either compensate a claimant in full for a certain period of time (subject to the usual mitigation considerations) and after that time period, to reduce the compensation awarded by a percentage, where the ET is 100% confident dismissal would have occurred within that period, or it reduces the claimant compensation by a percentage throughout the period.
What an ET cannot do is limit the period of compensation AND to apply a percentage reduction to the compensation during that period.
The matter was then remitted to the ET to explain if it had intended to limit Mr. Zebrowski’s compensation by 60% generally, or to hold that the 60% deduction would apply only from the two-month point post dismissal.
It appears then that only where the ET is certain that dismissal would occur at a point in the future that a time limited award is appropriate. If any doubt remains as to whether employment could continue, then a percentage deduction approach is the sole appropriate means of reflecting its uncertainty in that regard. What an ET cannot do is introduce a future date, and then the application of a percentage discount to reflect the prospects of an earlier dismissal as it applies to the same contingency, to the same Claimant, twice: something that ET’s must avoid.
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