Challenge to statutory cap on unfair dismissal compensation fails
The maximum unfair dismissal compensatory award is currently the lower of £76,574 or one year’s salary. The cap of one year’s salary was introduced on 29 July 2013.
The High Court last week dismissed an application from Compromise Agreements Ltd for permission to judicially review the statutory cap of one year’s salary. The firm had argued that the cap was unfair on older people, who could realistically find themselves out of work for more than one year and would therefore, but for the new cap, be entitled to recover more than one year’s salary. The firm contended that this made the cap indirectly age discriminatory.
The High Court rejected this argument and dismissed the application. No judgment has been issued so the exact reasons for the dismissal of the application are currently unclear. Compromise Agreements Ltd have said that they are considering whether to appeal.
When the cap was introduced some employers expressed concern that claimants would try to circumvent it, by attaching discrimination claims to their unfair dismissal claim (as discrimination compensation is potentially unlimited). However, tribunals have the power to strike out a claim that is ‘scandalous, vexatious or has no reasonable prospects of success’. Therefore, only legitimate discrimination claims should reach the hearing stage.
It is important to put all of this into context though. Figures suggest that less than 5% of claimants recover more than a year’s salary.
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