The Court of Appeal has held, in the case of Chagger v Abbey National plc, that an employer who unlawfully discriminates in dismissing an employee can be liable for compensation reflecting the stigmatising consequences of the dismissal and the proceedings, for example where the employee finds it difficult to get new employment because he is suing his former employer.

Mr Chagger was made redundant from his position with Abbey National, and an employment tribunal found that he had been discriminated against on racial grounds.  Mr Chagger was awarded compensation of £2,855,650, which included an award of £1,325,322 for future loss of earnings.  This was on the basis that he would never again be able to find employment in the financial services industry, following evidence being led from four companies who had refused to employ him, at least in part, because he had begun legal proceedings against Abbey. 

The Court of Appeal concluded that the original employer must remain liable for so-called stigma loss.  The unlawful actions of the third party employer did not break the chain of causation flowing from the original employer's discriminatory act.  Stigma loss will not be a separate head of claim, but will be taken into account by a tribunal when calculating future loss of earnings and the employee's ability to mitigate. 

In calculating loss, tribunals can apply the "Polkey" principle and ask whether Mr Chagger would have been made redundant anyway, even if there had been no discrimination.  If so, the award can be reduced.

Impact on employers 

• In principle, this decision opens the doors for Claimants to recover increased damages from their former employer if the stigma of having brought discrimination proceedings prevents them being employed in future.  The amounts involved could be significant.
• Before this decision, an employee had to bring separate victimisation claims against a prospective employer who turned down his job application because he was suing for discrimination. Now, though, that will not be necessary as he can look to his old employer to compensate him for the damage to his career.
• This type of claim will be difficult to prove and the Claimant will need to show "very extensive evidence of attempted mitigation, failing to result in a job".  It is relatively rare that an employee genuinely finds himself unemployable in his particular field because of legal action taken against a former employer.
• Where the discrimination claim relates to dismissal, employers can use the argument that the employee would have been dismissed in any event to seek to reduce the compensation awarded.

10 December 2009

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