For most ‘ordinary’ unfair dismissals, the compensatory award is subject to a statutory maximum, which is applied once all other deductions and reductions have been made. This statutory cap is currently £89,493 or 52-weeks’ actual pay if this is lower. The EAT has recently considered what impact the statutory cap has when the employee successfully appeals so that the amount of compensation awarded was revised upwards.

DO was dismissed from her role in a residential care home operated by a charity, CIC. An employment tribunal later held that DO’s dismissal was unfair and awarded DO around £46,000 in compensation. The statutory cap at the relevant time was £74,200. As the compensatory award was less than the statutory cap, the full amount was promptly paid by CIC in compliance with the tribunal’s order. DO then successfully appealed the remedy judgment and the tribunal later increased DO’s compensatory award to around £129,000. 

The question of the impact of the statutory cap was subject to an appeal before the EAT. Did the £46,000 already paid count towards the statutory cap, so that CIC only had a further £28,000 to pay (making £74,200 in total – ie limited by the statutory cap)? Or alternatively, should the £46,000 already paid be deducted from the total award of around £129,000, before the statutory cap was then applied to the balance, so that CIC still had a further £74,200 to pay (making £120,200 in total – ie more than the statutory cap)? 

The EAT held that the latter of these two options was the correct interpretation of the legislation. Therefore, the total award (of circa £129,000) was first reduced by the circa £46,000 already paid to DO. That then left a balance of £83,000, to which the statutory cap was applied, to reduce the payment outstanding to £74,200.

Unless overturned on appeal, this decision – which instinctively feels rather unfair (a point the EAT did not disagree with) - is likely to make employers reluctant to pay compensation awards on time where there is a potential risk of the tribunal’s award being appealed/reviewed. 

(Dafiaghor-Olomu -v- Community Integrated Care [2022] EAT 84)