Mitigation of loss: fixed-date assessment

A dismissed employee has a duty to mitigate their loss. Section 123(4) Employment Rights Act 1996, which deals with principles of calculating an employee’s loss, states that the duty to mitigate is the same as owed under the common law. Similar principles apply when assessing losses in a discrimination case.

The duty to mitigate loss is no more and no less than to act reasonably. It is a factual question and dependent upon particular circumstances. It does not mean that a dismissed employee must take the first job that they can, but if that job offer was at the same or similar rate of pay and there is no particular issue with it, then a respondent would likely persuade a court or tribunal that it was unreasonable not to take it and mitigate their loss.

There is no duty on a dismissed employee to prove that they have mitigated their loss. The burden of proving that a dismissed employee has failed to mitigate their loss rests with the party making the assertion, usually the respondent employer. It is well understood that if a party who bears that burden does not put before a court or tribunal evidence of a failure to mitigate, then such submissions are unlikely to be successful. What has to be shown is that the claimant acted unreasonably.

From a tribunal’s perspective, when incorporating a finding of failure to mitigate in its assessment of loss, can this be done through a percentage chance assessment? This was a point considered recently by the EAT.

In Edward v Tavistock and Portman NHS Foundation Trust [2023] EAT 33, the claimant employee was an NHS Band 5 data quality officer who was downgraded to a band 4 role following an assessment that he was incapable of working at a band 5 level. The respondent did not offer the claimant a band 4 job and dismissed him, which the ET held to be victimisation. The ET accepted that he was not redeployed because he had brought a grievance that the decision to put him on a performance improvement programme was discriminatory.

At Remedy stage, when considering the loss of earnings award, the consideration was of the period from the expiry of his notice period (June 2018) to when he started a new job (December 2020).

The respondent had argued that the claimant had not mitigated their loss by making applications for band 4 NHS work for which he was best suited. The claimant’s evidence was that there was a particular e-mail exchange with the respondent’s HR that led him to believe that in any request for a reference it would state that he was currently under investigation under disciplinary actions, but he nonetheless applied for non-NHS work. The claimant also used agencies and it was via an agency that he was interviewed for an NHS role in November 2019. The ET considered that the fact that he was interviewed for an NHS role should have encouraged him to revise his pessimistic view about likely success of getting employment within the NHS.

It was on that basis that when assessing loss of earnings and the respondent’s argument of a failure to mitigate by the claimant, the ET reduced by 50% the losses from November 2019 (when he interviewed for the NHS role) to December 2020 (when he started a new role) to reflect a failure to mitigate loss by applying for NHS work and the many band 4 roles available.

The 50% reduction as a result of an identified failure to mitigated was challenged on appeal. The Claimant argued that the tribunal erred in applying a percentage reduction to the period of loss between November 2019 and December 2020.

Reliance was placed on the EAT’s previous decision in Gardiner-Hill v Roland Berger Technics Ltd [1982] IRLR 498 to submit that the ET should have made a finding on the balance of probabilities as to when the Claimant would have found alternative employment and at what rate of earnings.

Following Gardiner-Hill, an ET would given consideration to 3 issues. Firstly, what steps were reasonable for the claimant to have to take to mitigate their loss. Secondly, did the claimant take reasonable steps to mitigate their loss. Thirdly, to what extent would the claimant have mitigated their loss had they taken those steps?

In considering those issues, the ET would identify a date, i.e. within a certain time period, when such reasonable steps would have resulted in mitigation of loss and assess losses accordingly. The findings are to be made on a balance of probabilities.

Was it an error of law for the ET to not follow that approach in Edward?

The respondent Trust argued that Gardiner-Hill should no longer be followed and that the EAT should depart from its previous judgment in that case on the basis of exceptional circumstances. The respondent argued that the assessment should instead be on a loss of a chance percentage assessment and that such an approach was not considered in cases after Gardiner-Hill on the issue of mitigation. Tribunals, of course, make such percentage chance assessments routinely already, e.g. Polkey reductions, Chagger assessments.

On closer analysis of Gardiner-Hill it was identified that it did not address the question of whether the fixing a date approach required a finding on the balance of probabilities, or some broader assessment of the chances of finding a new job. It seems that as an approach its usage is based on it being the done thing rather than any particular policy or principle.

In Hakim v The Scottish Trade Unions Congress UKEATS/0047/19 the EAT had followed the fixing a date approach, but recognised that there may be a case where a percentage can be used, if there is little or no actual evidence to go on. The general sense from that decision is that it would be rare to have adopt such an approach and doing so would require careful reasoning to justify it.

Ultimately, the approach that the EAT took in Edward was to continue to follow the fixing a date approach in Gardiner-Hill largely because the approach now has “considerable pedigree”. Whilst the ET had adopted a percentage-based approach in Edward, the EAT considered that it ought to have been possible to have made a finding on the balance of probabilities in this case and accordingly the appeal was upheld. It will be recalled from the above that the failure to mitigate argument concerned one particular band of jobs in the NHS and the ET had heard some evidence as to the prevalence of those jobs for it to make such an assessment.

Accordingly, the fixed-date assessment made on a balance of probabilities should be used when assessing losses from identified mitigation of loss.