The recent case of Islam Channel v Ridley has illustrated how compensation is calculated in cases of unfair dismissal.

After Ms Ridley had been unfairly dismissed by Islam Channel, she managed to obtain employment elsewhere at a rate of pay that was initially substantially higher than it had been in her former position. However, due to financial difficulties that her new employer had experienced, by the time of the hearing her pay rate had dropped to less than it was in her previous employment.

After Ms Ridley’s unfair dismissal claim was upheld by the court, compensation was calculated based on the difference between her current, lower rate of pay and the pay rate she had received from Islam Channel.

The Channel appealed, on the grounds that the compensation award did not take into account the larger pay amounts that Ms Ridley had enjoyed when she first started her new job.

The Employment Appeal Tribunal (EAT) refused the appeal, stating that the reason the higher payments were not considered was to take into account the uncertainty of Ms Ridley’s current employment situation owing to the difficulties her employer was facing.

In calculating compensation, the tribunal seeks to cover the financial loss caused by the dismissal. The claimant has a duty to mitigate that loss by seeking new employment. EAT guidance states that the loss attributable to the dismissal will only cease when the claimant has secured permanent alternative employment paying the same or more than the position that they were dismissed from.

The original tribunal was therefore well within its remit to speculate as to Ms Ridley’s future employment prospects and compensate her accordingly.

Technorati Tags: Compensation, Employment Tribunal, Unfair Dismissal