Mitigating your loss in Unfair Dismissal Proceedings

As with all types of legal claims for damages under the common law, unfair dismissal employee’s have a duty to mitigate their loss[1]. This means that they have to do all that they reasonably can to limit the loss of earnings that they may have suffered as a consequence of losing their employment.

In the event that an employee’s dismissal is ruled to have been unfair, the tribunal will go on to consider how much compensation the employee should be awarded. As part of this process, the tribunal may be asked by the Respondent to analyse the extent to which an employee has attempted to mitigate his or her loss.

The burden of proving that the employee has failed to properly mitigate their loss falls on the employer. The tribunal is, therefore, not duty bound to probe the employee’s efforts (or lack of them!) to mitigate their loss unless the employer alleges that the employee has failed to mitigate, and produces evidence backing up their allegation.

If asked to do this, the tribunal will consider whether the employee has, in taking or refusing a particular source of income, acted reasonably. What is reasonable will, however, depend on the facts of each case[2].

The approach which should be adopted by the tribunal when determining mitigation was set out in the 1998 Employment Appeal Tribunal case of Savage v Saxena[3]:

The tribunal must firstly identify what steps should have been taken by the employee to mitigate their loss; secondly, the tribunal must consider when it would have been reasonable for such efforts to have produced an alternative income for the employee; and thirdly, the compensatory award should be reduced by the income which would have been generated.

It is for this very reason that employer’s representatives will ask employees to send them copies of all of their mitigation documents. Such documents typically include evidence of registration with employment agencies, copies of job applications, rejection letters, and payslips of temporary work etc. Employer’s representatives often produce a bundle of job advertisements which would have been suitable for the employee so that – in the event that the employee is judged to have been unfairly dismissed – they can then argue that the employee has failed to mitigate his or her loss – in order to get the level of compensation reduced.

The analysis of mitigation evidence is not an easy job for the tribunal. To a certain extent they have to get their crystal balls out, and make an educated guess, based on their knowledge and on the evidence in front of them, when it would be reasonable to expect the employee to get another job paying the same or better remuneration as he or she previously earned.

The employment tribunal have a large degree of discretion when considering mitigation and, for example, would not necessarily expect an employee to take the first job that comes along, especially a lower paid job. Furthermore, it would probably be reasonable for highly skilled or educated employee to hold out for suitable job, rather than taking a low skilled job immediately. Conversely, an employee, irrespective of his or her skills or education, who is out of work for a significant period of time, may be expected to reduce their expectations. The tribunal have a tricky balancing act to perform.

Unfair dismissal

[1] S.123(4) Employment Rights Act 1996
[2] Yetton v Eastwoods Froy Ltd 1966 3 All ER 353, QBD.
[3] 1998, ICR 357, EAT