Discrimination — what’s the damage?

This article by Lynda Macdonald, freelance employment law advisor and trainer, aims to explain the principles involved when a tribunal considers what remedy to order in respect of an employee (or ex-employee) who has succeeded in a claim for unlawful discrimination.

It is unlawful under the Equality Act 2010 to discriminate against an employee, a worker (for example, a casual worker or someone engaged through an agency), a job applicant or (in some cases) an ex-employee on a range of grounds called “protected characteristics”. These are: sex, trans-gender status, pregnancy, race, religion or belief, sexual orientation, married or civil partnership status, age and disability. Discrimination can be direct or indirect, or may amount to victimisation on account of the individual having already complained about discriminatory treatment. Claims of harassment are also covered by the Act.

Liability

In cases of discrimination, it is open to the claimant to name more than one respondent (typically the employer and one or more of his or her colleagues). Where the tribunal finds (for example) that an individual manager was responsible for the claimant’s discriminatory treatment, it may, at its discretion, make an award of compensation on a joint and several basis. This means that, in the event of non-payment of all or part of the award, the claimant has the right to take enforcement action for the full amount of compensation against any one of the respondents, and each respondent can be made liable for the entire award. It will be up to the individual respondents to agree among themselves how much of the total award each of them should pay as the tribunal has no authority to determine this.

Remedies for discrimination

Where a case of unlawful discrimination succeeds, the primary remedy will be compensation as there is no authority for the tribunal to order reinstatement or re-engagement (unless the claimant has also succeeded in a claim for unfair dismissal).

Compensation

Compensation following a successful claim for unlawful discrimination is unlimited. The amount awarded will depend primarily on the employee’s losses, but will also usually include an award for injury to feelings. Less frequently, there may be an award for injury to health as well depending on whether there is medical evidence to justify such an award.

The value of the employee’s losses must be assessed to include all company benefits and pension contributions. If, however, the claimant is still employed by the employer, it may be that he or she has not suffered any financial losses at all. There is no need for an employee to resign in order to bring a claim for unlawful discrimination or harassment to tribunal.

Depending on the circumstances, the tribunal may “gross up” the award to take into account that the employee may be charged income tax on all or part of it.

Any compensation paid to the employee on termination (for example, an enhanced redundancy payment) will be offset against the amount awarded.

Injury to feelings

There is no precise formula for tribunals to calculate an award for injury to feelings, although there are guidelines. The amount awarded will depend on the nature and severity of the discrimination (eg harassment), how long the treatment went on for and/or the degree of hurt or distress suffered by the claimant.

The tribunal guidelines, which establish three bands of compensation, were recently updated as follows.

  • Lower band for less serious cases £800–£8400

  • Middle band for cases that are more serious £8400–£25,200

  • Upper band for the most serious cases £25,200–£42,000

Only the most extreme cases would attract an award for injury to feelings in excess of £42,000.

Other remedies for discrimination

Two other remedies are available to the tribunal following a finding of unlawful discrimination. The first of these is a “declaration”, which is simply a statement to the effect that the discrimination took place. This may be important for the claimant (eg on a matter of principle), and also potentially for the employer, for example, if it is contemplating taking disciplinary action against the person who perpetrated the discrimination.

Second, a tribunal may make one or more recommendations to the employer. Any recommendation must be practicable for the employer and must involve “specified steps for the purpose of obviating or reducing the adverse effects on the complainant”. Examples of recommendations could include considering the employee for the next promoted post, providing an apology or (if the individual is still in the employer’s employment) arranging equality training for the company’s managers.

Recommendations are not legally binding but where an employer fails to comply with a recommendation without a reasonable excuse, it may be ordered to pay the individual (additional) compensation.

Financial penalties

Employment tribunals have discretion to impose financial penalties (payable to the Secretary of State, not the claimant) on employers who are found to have breached employees’ rights where “the breach has one or more aggravating features”. This will include situations where the treatment of the employee was deliberate or malicious or where the employer had repeatedly breached the right in question. A penalty may also be levied where the employer has a dedicated human resources department (and so presumably should have known better).

The penalty is half of the total award made by the tribunal with a minimum of £100 and a maximum of £5000. A 50% discount is applied if the employer pays the penalty within 21 days.

The penalty levied is in addition to any compensation the employer is ordered to pay to the complainant.

Employers who fail to pay

An employer that fails within the requisite time period to pay a claimant, the compensation ordered by the employment tribunal can be ordered to pay a penalty (payable to the Secretary of State). An enforcement officer will issue a 28-day warning notice and if the employer still fails to pay, the penalty will be 50% of the outstanding amount, subject to a minimum of £100 and a maximum of £5000 (the same amounts as for “financial penalties” above).

Conclusion

An employer facing a claim for unlawful discrimination at tribunal will often ask how much it is likely to cost if they lose the case. As can be seen from above, the answer — inevitably — is “it depends”.