Employer's ability to pay

Case 1: The facts

The claimant in this case, Mrs Jin, brought a successful claim for unfair dismissal and failure to pay the national minimum wage and was awarded around £11,000. The employer, a small acupuncture business, appealed against the size of the award. One of the employer’s arguments was that paying an award of this size would force the business into liquidation.

The case turned on the meaning of section 123 of the Employment Rights Act 1996. This states that the amount of any compensatory award shall be a sum that is “just and equitable” in all the circumstances, taking into account the employee’s losses as a result of the dismissal, provided those losses were caused by the employer.

The ruling

The EAT confirmed that the main concern for a tribunal making an award for unfair dismissal is the loss suffered by the employee as a result of the employer’s action.

Importantly, the EAT spelled out that, when assessing compensation for unfair dismissal, the tribunal “will not pay attention to the ability of the employer to pay”, because it is not relevant.

Commentary

This case could provide useful ammunition against employers who argue that unfair dismissal compensation should be reduced because of their own financial difficulties.

Tao Herbs and Acupuncture Limited v Mrs. Y Jin Appeal No. UKEATPA/1477/09