Compensation in discrimination claims post-Chagger


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In the case of Chagger v Abbey National, the Court of Appeal set out important guidelines that could significantly increase the level of compensation payments in discrimination claims.

Facts

Mr Chagger, who is of Indian origin, was employed by Abbey National from November 2001 until his dismissal by reason of redundancy in April 2006. At subsequent Employment Tribunal (ET) proceedings, the ET found that Mr Chagger’s selection for redundancy had been tainted by race discrimination, and Mr Chagger was awarded compensation of more than £2.7 million, one of the highest ever tribunal awards.

Issues on appeal

The case went to the Court of Appeal where the following questions relating to quantum were considered:

  • Should Mr Chagger’s compensation have been reduced to reflect the chance that, even without discrimination, he would have been dismissed in any event?
  • Was the ET correct in assessing future compensation by reference to loss sustained by Mr Chagger over the remainder of his career, or should it have limited it to the period during which Mr Chagger would have remained in employment with Abbey National?
  • Whether Abbey National should be liable for the decision by third parties not to employ Mr Chagger because he had taken proceedings against Abbey National (the “stigma” consequences)?

The chance of dismissal in any event

The Court of Appeal held that an employer will only be liable for loss caused by the discrimination, as dismissal is not itself a wrong. The correct question to ask, therefore, is what would have happened had there been no discriminatory dismissal, rather than simply what would have happened had there been no dismissal? As there was clearly a chance that Mr Chagger would have been dismissed in any event, that had to be factored into the calculation of loss.

The period of future loss

Abbey National argued that the measure of loss should be limited to the period that, but for the discrimination, Mr Chagger would have remained employed by Abbey National.

The Court of Appeal disagreed, stating: “The task is to put the employee in the position he would have been in had there been no discrimination; that is not necessarily the same as asking what would have happened to the particular employment relationship had there been no discrimination. The reason is that the features of the labour market are not necessarily equivalent in the two cases.”

The Court of Appeal held that the proper measure should be determined by asking when Mr Chagger expected to obtain another job on an equivalent salary. In many instances, this will not differ from the period that, but for the discrimination, an employee would have remained employed by the employer. However, in this case, the evidence reflected a very real possibility that Mr Chagger would not have been able to find equivalent employment. As such, the Court of Appeal held that Mr Chagger’s loss should be assessed on the basis that he would have remained with Abbey National throughout his career in financial services.

Stigma loss

Mr Chagger had applied for, and been rejected from, 111 new roles. He claimed that this was in part due to victimisation by potential employers, who unlawfully stigmatised him by declining to employ him because he had brought proceedings against Abbey National. Abbey National argued that it should not be liable for loss arising from unlawful acts of third parties.

The Court of Appeal disagreed and held that the financial loss suffered by an employee who has been stigmatised because he has taken proceedings against his former employer was, in principle, recoverable.

The Court qualified the effect of this, however, by stating: “Plainly it would be wrong…to infer that the employee will in future suffer from widespread stigma simply from his assertion to that effect”. It pointed to the necessity of “very extensive evidence of attempted mitigation”.

In reality, stigma loss is likely to be another factor in calculating the period of loss in respect of which the employee should be compensated, rather than a separate head of loss.

Practical points

Given the potential level of compensatory awards in light of Chagger, it is key to minimise the risk of discrimination in the first place by ensuring that redundancy selection processes are objective and consistent. They should also be well documented. Where discrimination has occurred, an employer’s focus will be on evidence to show that the employee may well have been dismissed in any event.

This article appeared in Workplace Law on 1 September 2010

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