The Court of Appeal has recently confirmed that, in principle, it is possible for a Claimant to recover compensation to reflect the fact that other employers may be reluctant to hire an individual who has brought discrimination proceedings against their former employer.

The recent case of Chagger v Abbey National plc [2009] looked at this issue in detail. Mr Chagger was dismissed by Abbey National in 2006 by reason of redundancy. He brought proceedings in the Employment Tribunal where it was found that his dismissal was unfair and discriminatory on the grounds of race. When dealing with the issue of remedy, Mr Chagger demonstrated that, since his dismissal, he had unsuccessfully applied for 111 roles, some of which were of a lower status than his position at Abbey. He had made applications to work on a voluntary basis and had used up to 26 recruitment agencies in his attempts to find employment. Mr Chagger claimed that he was suffering stigma by prospective employers as a result of bringing proceedings against Abbey.

Mr Chagger was awarded compensation in the sum of £2,794,962.27 as the Tribunal considered that he would never be able to obtain employment in his chosen field in the financial services industry again. The Tribunal did not, however, make any specific finding about whether Mr Chagger had suffered any stigma.

Abbey appealed both liability and remedy decisions and Mr Chagger cross-appealed on a separate issue concerning the percentage uplift to the compensation awarded by the Tribunal for Abbey’s failure to comply with the statutory dismissal procedures in place at the time.

On appeal the EAT considered the principle of stigma damages in more detail than the Tribunal at first instance had done and held that Abbey could not be found liable for the conduct of third party employers who failed to hire Mr Chagger as the loss was too remote from the discrimination. They therefore considered that the Tribunal had been wrong to award compensation for anything more than Mr Chagger’s lost earnings with Abbey and they directed that compensation should be re-assessed on this basis.

This matter was then appealed into the Court of Appeal where it was recently heard.

In terms of how Mr Chagger’s loss should be calculated, the Court of Appeal found that the correct test was to determine when Mr Chagger might be expected to find another job on a salary equivalent to that of his Abbey role. From the evidence available, the Court of Appeal considered it was appropriate for the Tribunal to have assessed compensation on the basis that Mr Chagger would have remained in employment with Abbey for the rest of his career.

The Court of Appeal also considered the issue of stigma loss. It held that stigma loss is in principle recoverable and that any liability for such stigma loss remains with the original employer, in this case Abbey. It does not make any difference that the actions of the third party employer constitute unlawful victimisation and there is no requirement for the individual to bring a separate claim against the third party employer. However, the Court of Appeal emphasised that, in most cases, it will not be necessary for stigma loss to be considered as a separate head of loss as it will be considered in relation to the individual’s attempts to mitigate his loss and the likely duration of his unemployment. The one exception may be where a Tribunal finds that an individual would certainly have been dismissed even if there had no been discrimination. In such a case, the dismissal will be unfair but there will be no award of compensation unless the individual can demonstrate damage to his future employment prospects due to the fact that he has issued proceedings. However, the onus here will be firmly on the individual and it will be difficult to prove the loss.