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Employment Law Services Ltd

Unfair dismissal and the duty to mitigate losses

31st December 2015

It may not seem an interesting or stimulating subject, but the duty to mitigate losses has a significant impact when evaluating a claim (be that of unfair dismissal or unlawful discrimination).

We are frequently asked at the first meeting with a client "how much is the claim worth?" The problem in answering that question, especially if the employer has not actually terminated the employment yet, is that the value depends on a wide range of factors, and the final value at a hearing that may not take place until many months later may be very different from the value as it may initially appear.

A major factor that impacts the value of a case is the legal duty that the individual that has been dismissed has to reduce the loss to him/herself. This is known as the duty to mitigate loss.

In the case of Cooper Contracting Ltd v Lindsey the Employment Appeals Tribunal (EAT) has given some helpful guidelines on the principles that should be applied when considering if an individual has mitigated their losses.

As a starting point the EAT observed that it is not for the individual that has been unfairly dismissed to prove that he or she has mitigated their losses; rather it is for the former employer to demonstrate that the individual has acted unreasonably and so failed to mitigate their losses.

This case involved a common issue which was that after being dismissed the individual became self-employed. In the original hearing at the Employment Tribunal the Tribunal took the view that the individual had chosen not to seek alternative employment but had worked in a self-employed basis. It concluded that a reasonable course of action would have been to work for a period in a self employed capacity, but as other employment opportunities with higher pay arose a few months later that he should then have taken those opportunities. Accordingly the Tribunal limited the future losses to three months.

In the EAT a different view was taken. The EAT rejected the argument that ALL reasonable steps should be taken to reduce the loss. It then went on to set out a number of principles of mitigation:-

- The burden of proof is on the wrongdoer (ie the former employer) to show that the individual has not adequately mitigated their losses (the individual does not have to prove that they have mitigated their loss).

- Therefore if no evidence is brought by the former employer then the Tribunal has no obligation to make any findings on mitigation of loss

- The requirement is that the former employer has to show that the individual acted unreasonably, ie not that the individual did not necessarily act "not reasonably"- the EAT drew a distinction between acting unreasonably and not acting reasonably.

- The determination of unreasonableness is a question of fact, taking account of the individual's (the former employee) views and wishes- though the assessment of this is objective.

- The Tribunal should not in effect put the individual on trial as if the losses were his/her fault.

- Failure to take a better paid job is not necessarily unreasonable.

This case illustrates the fact that it is vital for any business in defending a claim of unfair dismissal to research and collect evidence about job opportunities available to the individual. This could include searching local job adverts, agency opportunities, jobs available through the job centres etc. All too often very little attention is given to this aspect of a case, and yet it can make a major difference to the final value of the case (or size of the order of compensation made).

If you need further help in dealing with the issues raised in this article please do not hesitate to contact us at Hallett Employment Law Services Ltd.       

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