The Court of Appeal has considered the application of the guidelines for calculating pensions loss used by employment tribunals.
An appeal was brought by a former employee at Plymouth Hospital NHS Trust, who left her job following illness and complained that the Trust had failed to make adequate efforts to enable her to return to work in a way that would have accommodated her condition. She succeeded in her tribunal claim for constructive unfair dismissal and disability discrimination, but considered the financial loss element in her award to be too low. Although the award was increased by the Employment Appeal Tribunal (EAT), the claimant still believed it was insufficient. A second appeal to the EAT was dismissed and so she appealed to the Court of Appeal.
The tribunal had chosen to apply the “simplified approach” to her pension loss, which was upheld by the EAT. The claimant contended the “substantial loss approach” should be used. The Court of Appeal agreed with the claimant, ruling that the tribunal had misdirected itself with regard to its reasons for preferring the simplified approach, and that if it had directed itself in a proper manner the only conclusion open to it on the facts was that it should have adopted the substantial loss approach. This situation arose because the claimant had been in employment with the Trust for a considerable time, and had not been looking to move employment given her specialist skills. Additionally, the tribunal had found that although the claimant would be likely to find alternative employment, she would suffer losses up to retirement in respect of pension rights, particularly through the loss of a final salary pension.
Lord Justice Underhill noted the guidance used for such calculations has no statutory force and suggested its application needs to be "considered critically" given that more than a decade has passed since the current version was produced and there have been substantial changes in pensions law over that period.
Although the facts of this case are quite specific, the case is noteworthy for three reasons in particular.
- It may suggest that the substantial loss approach could become more widely used, due to the current shortage of alternative final salary pension schemes available to claimants who can show that they were likely to have remained in their employment (and would have access to a final salary scheme) until retirement had it not been for their unfair dismissal.
- It clarifies that an employee's age is not a definitive indicator that the simplified approach method is appropriate to use, all of the facts are important.
- Finally, if the case involves discrimination or whistle-blowing, the award for pension loss could be very significant, particularly where the employee was a high earner, because the statutory cap on compensation does not apply to these claims.
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