An employee who has been unfairly dismissed has a duty to mitigate their loss by taking all reasonable steps to find alternative employment, and to not unreasonably refuse an offer of employment. If a claimant fails to mitigate their loss, any compensation to be awarded by an Employment Tribunal may be reduced. In the case of F & G Cleaners Ltd v Saddington, the Employment Appeal Tribunal (“EAT”) had to consider whether two employees who were unfairly dismissed upon a TUPE transfer had failed in their duty to mitigate their loss when they refused an offer of self-employment with the transferee.

The two Claimants were employed by a company which provided window cleaning services to a local authority. Following a re-tendering process, the contract was awarded to the Respondent. The Respondent refused to accept that the contract award constituted a relevant transfer to which the TUPE Regulations applied. It refused to continue to employ the Claimants on their current terms and conditions but, instead, made an offer to engage the Claimants on a self-employed basis, with a daily rate of pay, which the Claimants rejected. The Employment Tribunal (the "Tribunal") held that there had been a TUPE transfer, and the Claimants had therefore been automatically unfairly dismissed. It went on to find, however, that the refusal to accept engagement on a self-employed basis was not a failure to mitigate loss, as it was reasonable for the Claimants to refuse this offer, as it would have involved them having to give up statutory rights as an employee, losing job security, and they would have been financially worse off.

The EAT upheld this decision on appeal, confirming that, in considering any alleged failure to mitigate, it is not enough to show that it would have been reasonable for the employee to take the steps proposed, it must show that it was unreasonable for the employee not to take such steps. However, it went on to confirm that no duty to mitigate arises until after the employee has been dismissed and loss has therefore been incurred. In this case, the EAT considered that the employees were not actually dismissed until they refused the offer of self-employment, as their employment transferred to the Respondent as a matter of law on the transfer date. They then continued to be employed by the Respondent until the offers of self-employment were made. Therefore, the EAT concluded, not only did the Claimants not act unreasonably in refusing the offers, in any event their refusal did not constitute a failure to mitigate as no duty to mitigate had yet arisen at the relevant time.

Impact for employers

  • Had the Tribunal found there had been a failure to mitigate loss in this case, that would arguably have undermined the protections of TUPE by condoning the transferee’s actions, and reducing the compensation to which the Claimants were entitled, thus allowing the transferee to profit from its own actions.
  • That said, it does not follow that it will always be reasonable for an employee to refuse an offer of re-employment from a former employer: each case will depend on its own facts.