June 26, 2013

Unfair dismissal compensation and set-off

When Optimum lost a major contract to other companies, it considered that the employees transferred under TUPE but the putative transferee disagreed. The employees were dismissed and Mr Muir bought an unfair dismissal claim against Optimum and 9 other companies as potential transferees. One of them entered into a settlement agreement with Mr Muir, paying him £20,000.

The claims against all the other potential transferees were then dismissed (reasons not relevant) and the claim proceeded to a Tribunal against Optimum only. The Tribunal found there had been no TUPE transfer and so the Claimant won his claim for unfair dismissal and was awarded £30,858, of which £23,668 was the compensatory unfair dismissal award. However no set-off was made in respect of the payment made by the putative transferee in settlement of that claim on the basis that Optimum would receive a windfall by having to pay much less than it should have done especially in a situation where there was no transfer.

This was overturned on appeal by the EAT, which held that this settlement payment should have been deducted from the compensatory award because the nature of the award is just that: compensatory. It does not allow an individual to recover more loss than he or she has suffered, which is what would have happened here had the set-off from the settlement offer not been taking into account in the overall amount which Optimum had to pay.

The result is therefore that any payments made by a Respondent to a Claimant in settlement of that particular Respondent’s claim must be offset against any award made if the Claimant proceeds with his claim against any remaining Respondents and is made an award in the Tribunal.

This legal update is provided for general information purposes only and should not be applied to specific circumstances without prior consultation with us.

For further details on any of the issues covered in this update please contact Gemma Ospedale, Partner in Employment on 020 7583 2222.


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