Right answer for employers to £2.8 million pound question

Published: 22nd October 2008

Abbey National have succeeded in overturning on appeal a race discrimination award of £2.8 million. The decision of the Employment Appeal Tribunal in looking at the approach tribunals should take to discrimination awards, thankfully reinforces some of the main ways in practice in which such awards are limited. However, the case is a somewhat salutary reminder of the risk which can be faced from a discrimination claim where there is no limit upon the remedy which can be awarded.

Mr Hopkins was made redundant by Abbey National, after his manager volunteered that costs savings could be made by removing one of the two employees doing Mr Hopkins' job and then selected Mr Hopkins by scoring him lower than his colleague on a series of (complex) criteria. Mr Hopkins alleged that his manager had discriminated against him on the grounds of his colour and Indian origin. The Tribunal concluded that the selection undertaken by the manager was grossly unfair and had been undertaken to remove Mr Hopkins from the manager's team. They then concluded that this was discrimination on racial grounds, a reminder that tribunals will scrutinise carefully how such an exercise is undertaken in a discrimination claim.

Prior to winning his claim, Mr Hopkins had valued his case at £323,000 but, after winning, he contended that he would never be able to find another job at anything like the same salary level (he had changed careers to do a teacher training course) and that he should recover loss for the 23 years left of his working life. The tribunal agreed and, by working out future loss by applying the tables used in personal injury claims (when an individual will not work again), awarded him just under £2.8 million.

Thankfully the EAT have confirmed that this approach was wrong and have sent it back to the Tribunal to decide again what compensation he should receive. They have confirmed that discrimination awards should reflect the earnings which the individual would have received in the future from that specific employer, if the discrimination had not occurred. In reality employees leave voluntarily, become ill, and employers go out of business. Future lost earnings awards should take these elements into account. They rejected an argument that because he had the stigma of having brought a tribunal claim he would never get another job and made clear that this was not a basis for awarding higher amounts. They also ordered the Tribunal to re-consider whether he would have been made redundant in any event if the process had not been undertaken in a discriminatory way, and said they should reduce the award by a percentage to reflect that chance.

This decision means that such an exceptionally high award should not be repeated very often, if at all. However, the fact that a Tribunal awarded such an amount is a reminder to employers of the very high awards that are possible and reinforces the importance of fair and transparent redundancy processes which stand up to careful scrutiny. The EAT did point out that people dismissed from jobs which they would expect to retain for life (the police or army were their examples but the same may be argued to be true of other jobs such as GPs and Consultants) could recover full loss of working life awards. A risk also arises where any individual suffers an adverse mental health reaction to the discrimination. It is also a reminder that Claimants are not locked into the schedules they provide during claims and can recover higher amounts than outlined at an early stage (which may be important when considering settlement).

The EAT made one other legally important point in their decision. Previous cases have suggested that discrimination on the grounds of colour is subject to a different test to that of other racial grounds because of the way recent amendments were drafted. The EAT have rejected this, pointing out the inevitable overlap between alleged discrimination on the grounds of colour, national origin and ethnic origin, and concluding that all such complaints are subject to the same test.

If this decision raises any issues for your organisation, please raise these with your usual contact in the Mace & Jones employment and HR team.