Calls for Judicial Review of government’s decision to cap unfair dismissal compensation at one year’s salary!

News - 02/12/2013

CODE: Amber

On 25 October 2013, Compromise Agreements Ltd, an employment law firm, issued a judicial review claim against the government’s decision to cap unfair dismissal compensation.

Since 29 July 2013 the maximum compensatory award for unfair dismissal is limited to the lower of 52 weeks’ gross pay or the statutory maximum of £74,200.  Where the claimant’s weekly remuneration varies with the amount of work done, one week’s pay may also include commission or similar payment as set out in section 221 of the Employment Rights Act 1996).

CA Ltd’s main argument is that the impact assessment carried out by the BIS was “Wednesbury unreasonable” as it was fundamentally flawed in its analysis of the impact that the cap would have on older people. They argue that the cap indirectly discriminates against people on the grounds of age as older dismissed employees are likely to be out of work for longer. Therefore the 52 week cap is insufficient compensation. CA Ltd make reference to the EAT case of MacCulloch v Imperial Chemical Industries 2008 EAT where the judge stated that “older workers find it harder to find work than younger workers” and argue that the Government Impact Assessment itself acknowledges that people over 50 are finding it much harder to find work. The Impact Assessment only surveyed people over the course of one year so did not highlight those that were out of work for more than one year.

CA Ltd set out in their claim that due to restricted resources they have had to limit their argument to indirect age discrimination, however, the firm add that the cap may also disproportionately affect women, ethnic minorities and disabled people. They do not go into detail of their arguments on this but state that these groups often take longer to find employment and are often paid less.

Permission needs to be granted by the Administrative Court for the application to proceed. If the application is successful then it is within the court’s power to make a quashing order setting aside the decision of the government, together with a mandatory order that the government re-make the decision on the compensation cap based on the court’s guidance.

Vince Cable, the Secretary of State for BIS, was due to respond to the judicial review application by 29 November 2013 so keep an eye on our blog for his response!

This is not the first change in employment law being challenged in the courts this year. See our 12 July 2013 blog in which we reported on the legal challenge to the introduction of tribunal fees for claimants. The High Court Judgment is due in this following a hearing in October.

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