Blowing the whistle on caps

It has been widely reported that Michael Woodford, UK Chief Executive of Olympus, sacked after less than two weeks employment, has settled an unfair dismissal claim said to have been worth millions.

How can that be?  This graphically illustrates how employers are exposed to potential claims from day one in employment – or possibly even before – without any cap.  These claims arise where either the employee has been discriminated against or has been subjected to a detriment, in this case unfair dismissal, as a result of his having made a protected disclosure or colloquially “blown the whistle”.

It is an oddity of our legislation that “ordinary” unfair dismissal requires a qualifying period, currently in the process of increasing from one to two years, and then comes up against a cap of a basic award (equal to statutory redundancy) up to £12,900 plus a compensatory award up to £72,300.

Whereas if you are dismissed at any time because you have “blown the whistle” or because of what the Equality Act defines as a protected characteristic unlimited monies may come your way.

Looking at the Beecroft report on employment law published recently and its root and branch attack on unfair dismissal, there is no particular logic in capping compensation flowing from an unfair (and for that matter wrongful) dismissal whilst discrimination within employment or the unspeakable sin of dismissal or detriment following a protected disclosure, can bring riches.

Originally compensation for sex and race discrimination was capped at the same level as unfair dismissal; that was before the statutory claim for whistle blowing existed.  The cap went following a long running and ultimately successful challenge by reference to European law to the sex discrimination limit.  That was in 1993, since when all discrimination claims give rise to unlimited compensation (and they have never required any qualifying service).  The same goes for whistle blowing claims.  The UK’s hand on the former is tied by Europe and calls for the reintroduction of a cap, for example by the Government’s professional services group last summer, will go unheeded.

Going back to Mr Woodford, there is no reason why he should have received a penny less than he would otherwise have simply because he only had worked for a matter of days.  He would have had to show that he had made a protected disclosure and that had caused his dismissal; causation is the battleground in most whistle blowing cases.

But had he succeeded, he could well have received a big award.  The amount would largely have turned on mitigation.  It is surely an anomaly, and an unsatisfactory one, that a completely groundless and spectacularly unfair sacking from the same position would give rise to no statutory claim were it for a different but equally unacceptable reason.

It is worth adding that various imaginative attempts to get around the strictly limited compensation available for unfair (and wrongful) dismissal by reference to the common law have come to nought.  The latest attempt was to recover damages for lost reputation flowing from the manner of dismissal.  This came before a seven judge Supreme Court at the end of last year in the case of Edwards v Chesterfield Royal Hospital NHS Foundation and failed by four votes to three.