On 29 July 2013 the Unfair Dismissal (Variation of the Limit of Compensatory Award) Order 2013 reduced the cap on any award of compensation made for unfair dismissal to the lower of £74,200 or one year’s salary.
Prior to this the cap was a maximum of £74,200.
The new compensation cap applies to all claims where the effective date of termination is on or after 29 July 2013.
In response to this reduction in the statutory cap, Compromise Agreements Limited (CA), an employment law firm which represents claimants, has applied for permission from the High Court to apply for Judicial Review. They state that the amended statutory cap ‘represents a disproportionate response to the concerns of the Secretary of State to limit compensation awards to employees who have been unfairly dismissed.’
CA argue that the new cap of one year’s salary will primarily impact those earning less than £74,200 per year, and who are likely to be out of work for more than a year following an unfair dismissal. They argue that it will not be just those who have won an unfair dismissal claim, but also those contemplating bringing such a claim in the first place. They believe it discriminates against older people as older people are more likely to be out of work for more than a year and therefore would be eligible to more than a year’s compensation were it not for the new cap. As such they argue that the new reduced cap indirectly discriminates against older people.
CA also contends that the DBIS Impact Assessment is fundamentally flawed (and therefore forms a ground for judicial review) in its analysis of the impact the imposition of the cap of one years’s salary would have on older people and that there will be many older potential claimants with meritorious claims who are put off or prevented from claiming by the new cap. This, they argue, is indirect discrimination in relation to access to justice.
In the interests of wider public interest, CA have stated that it is not just the rights of the claimant (or potential claimant) which are affected by the new cap. If compensation is restricted to one years’ salary, but the claimant will be legitimately out of work for over one year, then who will support the claimant financially? They have stated that it is likely that the public purse, in the form of benefits, will take at least some of the burden of this, rather than the employer actually responsible for the unfair dismissal in the first place.
CA is seeking a quashing order of the introduction of the one year salary cap or declaratory relief to give effect to such findings as the Court may make. They have also applied for a protective costs order because if they lose their case, it could result in an adverse costs order of £80,000!
The Government’s response is awaited.