Case update: Employment Appeal Tribunal (EAT) summarises principles regarding mitigation of loss

8 January 2016

In the case of Cooper Contracting Ltd v Lindsey, the Employment Appeal Tribunal (the “EAT”) dismissed an appeal challenging the compensation awarded to a former employee following a successful unfair dismissal claim. When considering this appeal, the EAT set out a number of important principles that should be considered when deciding whether or not a former employee has properly mitigated their loss.

Mr Lindsey worked for Cooper Contracting as a carpenter for 21 months until they terminated his employment contract in December 2013. Following his dismissal, Mr Lindsey was successful in bringing an unfair dismissal claim. Mr Lindsey was awarded lost income up to the date of the hearing and future losses (which were limited to three months from the hearing). Cooper Contracting appealed against the compensatory award as they believed that, by returning to his former role as a self-employed carpenter and by failing to pursue more lucrative employment opportunities, the Claimant had not taken all reasonable steps to mitigate his loss and his compensation should be reduced accordingly. Cooper Contracting also sought to argue that the Judge at the Employment Tribunal had effectively found that if Mr Lindsey did not take a job within 3 months of the date of the hearing, he would have failed to mitigate his loss.

When considering the appeal, the EAT set out the following principles in relation to mitigation of loss.

  1. The burden of proof is on the employer as opposed to the Claimant. It is not for the Claimant to prove that they mitigated their loss. This principle was established in Banco De Portugal v Waterlow & Sons Ltd in which Lord Macmillan stated that “It is often easy after an emergency has passed to criticise the steps which have been taken to meet it, but such criticism does not come well from those who have themselves created the emergency.”
  2. The burden of proof is not neutral. If the issue of mitigating loss is not addressed by the Respondent, it need not be considered by the Tribunal.
  3. The Respondent (employer) must prove that the Claimant acted unreasonably, the Claimant does not have to show that what he did was reasonable.
  4. There is a difference between acting “unreasonably” and not acting “reasonably”. Whilst it might be reasonable to accept the offer of a better paid job, it would not necessarily be unreasonable to explore less lucrative options. In Gardiner-Hill v Roland Berer Technics Ltd, an employee was held not to be in breach of his duty to mitigate where he chose to pursue self-employment following a period of employment in a very well-paid job.

    In the original tribunal decision, Judge Foxwell stressed that “there may come a time in a person’s working life when some types of work are no longer appropriate… Mr Lindsey’s evidence was that he preferred to be his own boss having had the experience of employment with the Respondent. It is very much his own choice.”
  5. In the appeal, Judge Langstaff highlights the dangers in suggesting that the duty to mitigate is a duty to take all reasonable steps to lessen the loss. If such a position was adopted, the Respondent would potentially be able to reduce the Claimant’s compensation by identifying just one reasonable step which was not taken.
  6. Whilst the test itself is objective in nature and considered from the Tribunal’s perspective, the application of the test takes into account the views and wishes of the Claimant, as one of the circumstances.
  7. The Tribunal is not to apply too demanding a standard to the Claimant. The Tribunal stressed that the Claimant should not be put on trial as if they were the party at fault. 

Contrary to what had been suggested by Cooper Contracting, it was held that the Employment Tribunal Judge had not said that Mr Lindsey would have failed to have mitigated his loss by remaining as a self-employed person for the three month period. Rather, the fact that the Claimant was unwilling to consider more lucrative employment opportunities meant that it was “just and equitable” under s123 of the Employment Rights Act 1996 to cap future loss at three months to ensure the award was fair and did not overcompensate Mr Lindsey.

Generally, adopting the principles set out above, the judge had not erred in law in concluding that Mr Lindsey had not acted unreasonably in pursuing self-employment. 

Further information

If you need advice in relation to unfair dismissal, an appeal or another aspect of employment law, please contact a member of our employment team.          

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