Unfairly dismissed employees can claim for non-financial losses

12 February 2004

In cases of unfair dismissal, s123 of the Employment Rights Act 1996 gives tribunals the power to make awards which are 'just and equitable...having regard to the loss sustained by the complainant in consequence of the dismissal'. Debate has raged whether this includes non-pecuniary losses caused by the unfair dismissal, (such as for distress, humiliation, damage to reputation or family life and psychiatric injury) or whether it should be limited to economic loss.
 
In its judgment in Dunnachie v Kingston upon Hull City Council, the Court of Appeal held (by a majority) that tribunals do have the power to compensate for non-financial loss. However, such damages will not be awarded in every case. Tribunals may only compensate an employee for real injury to his or her self-respect caused by the manner in which the dismissal was handled. This will have particular impact in constructive dismissal cases - that is, where an employee resigns in response to the employer's perceived fundamental breach of the employment contract.
 
This is likely to be appealed to the House of Lords.