The recent case of Dafiaghor-Olomu v Community Integrated Care [2022] EAT 84 is a good demonstration of the rough justice that is occasionally dispensed by the Employment Tribunal system.

It is well known that the amount of compensation that an employer can be ordered to pay for a straightforward unfair dismissal claim is subject to a statutory maximum amount of 52 weeks’ pay (commonly referred to as the “statutory cap”). In Dafiaghor-Olomu v Community Integrated Care, Mrs Dafiaghor-Olomu won her unfair dismissal claim against her employer. At the remedies hearing, the tribunal awarded her £46,153.55 in compensation and the employer paid this amount in full. The claimant successfully appealed the outcome of the remedies hearing and her award was subsequently increased to £128,961.59 following a second remedies hearing. The claimant appealed again to the EAT in respect of the remedy.

The key question for the EAT to determine was how the statutory cap should be applied in this unusual scenario in light of the earlier payment of £46,153.55. In particular, the EAT had to decide whether:

  1. The employer should be given credit for the earlier payment of £46,153.55 before the statutory cap was applied leaving the employer with an outstanding balance to pay of £74,200 (the statutory cap at the time of dismissal); or
  2. The statutory cap should be applied to the total award first, and then the employer given credit for the earlier payment of £46,153.55, leaving the employer with an outstanding balance to pay of £28,046.45.

In a worrying development for employers, the EAT decided that when calculating compensatory awards in unfair dismissal claims, the statutory cap should be applied after giving the employer credit for any earlier payments. This meant that the employer did not benefit from the £46,153.55 payment it had already made to the employee, and it was required to pay the employee an amount in excess of the statutory cap.

The EAT concluded that Parliament’s intention under the relevant legislation (section 124(5) of the Employment Rights Act 1996) was that any earlier payments paid by the employer (including those made following an earlier remedies hearing) should be deducted from the total compensation before applying the statutory cap. Whilst this interpretation is understandable in light of the literal wording of the legislation that anticipates the statutory cap being applied last (after deductions for amounts already paid by the employer), the outcome is arguably perverse. Had there not been an earlier order or had the employer not complied with it, they would have paid the lower amount of the statutory cap. Instead, the employer in this case ended up having to pay an amount in excess of the statutory cap. The EAT recognised this and was sympathetic to the employer, but also noted that from the appellant’s perspective it is just and equitable for her to receive as much of her total loss as possible.

We query the logic of this decision – it can hardly have been Parliament’s intention for the employee to be awarded more than the statutory cap where the employee appealed the outcome of the remedies hearing. Further, it is hard to reconcile this with the statutory requirement that the compensatory award should be of “such amount as the Tribunal considers just and equitable in all the circumstances”. Unsatisfactorily, the decision discourages employers from prompt compliance with tribunal orders. Ultimately, the decision could delay payments to employees.

We wait to see whether the decision will be appealed.