Compensation for Unfair Dismissal: Mitigation of Loss

Background

The case of Noel Baron v Orbit Security Limited (ADJ00032287) examines the circumstances under which redress will be awarded where an employee fails to demonstrate they took sufficient efforts to mitigate their losses.

Mr Baron (the Complainant) brought a complaint under Section 8 of the Unfair Dismissals Act, 1977 against Orbit Security Limited (the Respondent) to the Workplace Relations Commission (WRC), alleging that he had been unfairly dismissed without due process or fair procedure, ostensibly due to redundancy. 

Legislation and Case Law

Although the complaint was primarily grounded in Section 8 of the Unfair Dismissals Act, 1977 which assumes that an employer will be in a position to explain any reasons why an employee was terminated, this case focused on Section 7 of that Act which sets out the various factors to be considered in making of compensation.

It provides for an Adjudication Officer (and the Labour Court) to consider such redress as is considered appropriate ‘having regard to all the circumstances.’

The requirement to have regard to all the circumstances is repeated in Section 7(1)(c) in relation to the assessment of what will constitute ‘just and equitable’ compensation.

How ‘all the circumstances’ is to be assessed may be gleaned from reading Sections 7 (2) (a) to (f) and these six itemised criteria include the conduct of the employer (including their compliance with fair procedure), and the conduct of the employee and their contribution (if any) to the dismissal.

Section 2(c) deals with the requirement placed on the complainant to make efforts to mitigate his loss in assessing the level of compensation.

The complainant gave evidence of his attempts at mitigation. While he made some effort to do so he pointed out that his former employer had something of a monopoly on security jobs in the area and the pandemic was still a factor.

Of course, efforts at mitigation should not be confined to seeking jobs in the complainant’s traditional area of employment (and, in his evidence he did mention applying for a job as a driver). These efforts were insufficient, and the Adjudication Officer factored them into his award.

Nonetheless, in measuring the weight to be attached to all of these various components of the termination in Section 7 of the Act, the requirement placed by the statute on an Adjudication Officer to have regard to ‘all the circumstances’ provides an overarching framework and is required to be taken seriously.

Decision

Ultimately, the Adjudication Officer decided that: 

“ … the treatment of the complainant and the manner of the termination of his employment was deplorable and was compounded by a total disregard for his constitutional rights to a fair procedure. This stands out as the most significant of those circumstances required to be evaluated by the statute and is a particular breach of Section7 (2) (d) and (e).

Therefore, in assessing ‘all the circumstances’ as required by the Act, the inadequacy of any efforts by the complainant to mitigate his loss must be properly weighed in the context of the full requirements of Section 7.

There is nothing in the Act to suggest that the significance of an employee’s failure to mitigate should be elevated beyond any of the other five criteria set out there. Indeed, given that three of the five relate to the employer’s conduct and conduct of the termination process, a contrary case could be made, and on the facts of this case it would succeed.”

The Adjudication Officer assessed the total loss of earnings on the part of the Complainant as €19,080 but reduced this amount by 50% to take into account the inadequacy of his mitigation, bringing the sum under assessment to €10,000.

Takeaway

The takeaway for employees considering bringing a complaint under Section 8 of the Unfair Dismissals Act, 1977 is to be in a position to show that the steps taken by them, subsequent to the termination of their employment, could be considered reasonable and earnest to avoid any diminution in compensation awarded.

The takeaway for employers, it will be necessary to demonstrate that the manner in which the termination was effected was a reasonable one to ensure that the act of termination itself is not seen as being so unjust as to deserve compensation beyond the mitigated losses.

Furthermore, an employer defending a complaint under the Unfair Dismissals Act, 1977 should challenge any efforts made by the former employee to secure alternative employment.

Further information

This article was prepared by Barry Crushell for informational purposes only. For further advice, please email contact@crushell.ie or contact the offices of Crushell & Co Solicitors.