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Career-long compensation should be rare, says Court of Appeal

A company does not have to compensate an employee it has unfairly dismissed for loss of earnings spanning the remainder of the worker's career if there is a chance the worker could get a job on the same salary in the future, the Court of Appeal has said.16 May 2011

Lord Justice Elias, Lady Justice Smith and the Master of the Rolls ruled that an Employment Tribunal had erred when it awarded a banking employee career-long compensation for unfair and victimised dismissal. They said compensation should normally only cover a period between when a person loses a job and finds another one on the same salary.

"Assessing the loss up to the point where the employee would be likely to obtain an equivalent job, does fairly assess the loss in cases - and they are likely to be the vast majority - where it is at least possible to conclude that the employee will in time find such a job," the judges said in the Court of Appeal ruling.

The court said that some sacked employees would be able to claim compensation for loss of earnings spanning the remainder of their careers, but only in exceptional cases. The court cited a case where one man had been awarded career-long compensation at an Employment Tribunal.

"By the time the Tribunal came to assess compensation in his case he had already been out of a job for some years. The evidence was that he had made every effort to obtain employment in his chosen field. There was a suggestion that he had been stigmatised in the eyes of other employers as a result of the manner of his dismissal. He had taken reasonable steps to mitigate his loss by going into teaching. In these circumstances the Tribunal was entitled to conclude that he had suffered permanent career damage and should be compensated accordingly," the court said.

The Court of Appeal ruled that Mr Wardle, a banking employee, should not receive career-long compensation, overturning decisions by an Employment Tribunal and an Employment Appeals Tribunal to award him damages covering the period up until it was thought Wardle would retire.
Wardle took investment banking firm Calyon to Tribunal when the firm sacked him. The Tribunal found that he was unfairly dismissed and victimised after he was refused promotion.

Wardle should not be paid compensation for a period until retirement because there was a good chance he would get another job on the same salary, the court ruled.

"The Tribunal found that there was a 70% chance that [Wardle] would obtain equivalent employment in banking by the end of 2011... The basis on which the Tribunal concluded that [Wardle] had this 70% chance was that he would remain [in his new job] with the [Financial Services Authority (FSA)] for a sufficient period to enable him to learn the skills of, and gain experience as, a regulator, and to make contacts with senior risk officers and managers in banks," the court said.

"In my view, it is reasonable to conclude that [Wardle] would probably have been able to leave the FSA and obtain an equivalent job by the end of June 2011. He would have gone from his FSA salary (including bonus) to the equivalent he would have had if he had not been unlawfully refused promotion within Calyon," the court ruled.

The judges ruled to lower the amount of compensation that Wardle would be due. Career-long compensation did not apply, and there should be a reduction in estimations the Tribunals had made when calculating what money Wardle would have lost by taking other jobs relative to what he would have earned in the promoted role at Calyon, the court ruled.

Wardle was sacked from his job as Global Head of Exotic Interest Rate Derivatives Risk Management with Calyon in 2008. Calyon said it could no longer trust Wardle and that his relationship with the Head of Risks Management had broken down, the court said.

Wardle had just months before applied for a promotion to become Head of Risks Management at the firm. His application was rejected because he was not French and was an act of discrimination on the grounds of nationality under the Race Relations Act, according to the Court of Appeal papers.

An Employment Tribunal ruling found that Wardle's dismissal was both unfair and an act of victimisation and worked out compensation based on money Wardle would have earned in the Head of Risks Management role.

The complicated calculation accounted for salary and bonus payments in the new role relative to what Wardle had failed to earn when out of work, what he earned in his new job at the Financial Services Authority and estimated career-long compensation based on what Wardle was currently earning and would earn in the future compared to what he would have earned if in the promoted role at Calyon.

The Tribunal added a penalty fee to the total compensation calculated because Calyon had not informed Wardle that he was at risk of redundancy before firing him, the court papers say. The Tribunal awarded Wardle £375,000 in compensation.

Both Wardle and Calyon appealed the decision to the Employment Appeals Tribunal (EAT). The EAT reduced Wardle's payout but upheld the decision to force Calyon to pay Wardle for loss of earnings until he was to retire.