Recent decisions of the Labour Court highlight that compensation for a successful unfair dismissal claim will be reduced if the employee does not demonstrate reasonable efforts to replace their previous income.
Essentially, claimants will not be compensated for loss of income during periods when they were not actively seeking alternative employment. This is particularly relevant considering the latest Labour Force Survey figures for Q2 2023 released by the Central Statistics Office showing full-time employment levels in Ireland at 74% currently, the highest rate since the current series of records began in 1998.
How does a deciding body determine the compensation amount in unfair dismissal cases?
The Workplace Relations Commission (“WRC”) (and the Labour Court on appeal) can compensate a successful claimant for lost income attributable to their dismissal, pursuant to the Unfair Dismissals Acts (“UDA”), of up to 104 weeks’ pay. This compensation is to cover both financial losses suffered by the individual, and any estimated future loss of income which is attributable to the dismissal. The UDA do not allow for the compensation awarded to go beyond the financial loss attributable to the dismissal. Claimants are not compensated for distress and emotional suffering. This contrasts with the Employment Equality Acts which provide that compensation due to discrimination is based on the effects of the discrimination rather than a test of lost salary.
Under the UDA, claimants have a duty to mitigate financial loss between the date of their dismissal and the date of the scheduled hearing of the case, by taking diligent steps to secure comparable alternative employment. Claimants need to provide documents to prove their efforts (e.g., the roles applied for, interviews attended, job offers received, reasons for declining roles).
Recent Labour Court decisions
In the Labour Court case of Cityjet v Gil (UDD215), the departed employee provided information to the Court about the financial losses he incurred because of his dismissal. However, he was not able to produce evidence to substantiate those losses and demonstrate efforts he adopted to mitigate his losses. He contended that his inaction to apply for suitable alternative jobs following dismissal was because of health challenges and also, he was looking to develop his career. As there was no evidence to support his losses, the Court saw his WRC award reduced from €6,000 in the WRC to just under €1,800.
A more significant compensatory award reduction can be seen in the Labour Court case of McGuire Haulage Limited v O’Farrell (UDD2324). Here, the Labour Court held that subsequent efforts made by an employee to mitigate his losses were inadequate where the efforts were “infrequent and largely informal rather than structured in nature” and limited “to a very restricted geographical area”. It was these factors that led to the Labour Court reducing the initial WRC compensatory award by €50,000 to reflect a more just and equitable amount.
A further recent example which stresses the importance of mitigating financial loss in an unfair dismissal case is N Smith & Sons Ltd t/a Ford Smiths of Drogheda v Ragelis (UDD2332). In this case, despite applying for “seventeen jobs” and speaking “by telephone with six contacts in an eight-month period”, the Labour Court considered the efforts exerted by the employee fell “very far short of the obligation placed by the Act”. While the Labour Court agreed with the WRC that the employee had been unfairly dismissed, the Labour Court held that no compensation was payable in this instance thereby varying the €2,000 compensation originally awarded to zero.
These cases serve as important reminders to both individuals taking unfair dismissal claims and businesses defending such claims that the standard expected of employees in mitigating losses is high. For instance, it is not enough for the individual to inform agencies that they are available to work or post an application to several companies seeking work. To meet the bar and convince a deciding body that sufficient efforts have been made, documentary evidence of the attempts to mitigate the loss must be provided.
An employee should employ reasonable time into seeking alternative work and demonstrate genuine and concerted attempts to become employed again. While a dismissal may be inherently unfair in substance, efforts made to mitigate the resulting fiscal losses are factored in when evaluating the extent of compensatory awards.Back to Full News
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About the Authors
Anne is a partner in the Employment team at Hayes solicitors. She has considerable experience advising and representing employers and employees on all aspects of the employment relationship from pre-employment matters to termination.
AJ is a solicitor on the Employment team in Hayes.