Gourlay v West Dunbartonshire Council - A Tribunal’s decision to reduce a claimant’s compensation was based on “perverse conclusions and material errors of law”

In a recent judgment in the case of Gourlay v West Dunbartonshire Council, the Employment Appeal Tribunal has provided useful guidance setting out how tribunals should critically assess financial loss in discrimination claims. The case also reiterates the importance of preparing for remedy hearings, particularly where the employer is running an argument that the employee’s compensation should be reduced for some reason.   

Background

Mr Gourlay started working for West Dunbartonshire Council (the Council) in April 2008 as a Corporate Health and Safety Officer, and he was later dismissed in September 2015 for gross misconduct. Mr Gourlay brought a number of Employment Tribunal claims against his former employer, including unfair dismissal, failure to make reasonable adjustments, and victimisation. 

The failure to make reasonable adjustments arose out of the Council’s failure to provide Mr Gourlay with appropriate office equipment that would have helped him manage his multiple sclerosis at work. The victimisation claim arose out of the Council’s decision to suspend and dismiss Mr Gourlay, and their decision to refuse his appeal.  As a result of these events, Mr Gourlay experienced a severe depressive episode which rendered him permanently unfit for work. 

Employment Tribunal 

The Employment Tribunal ruled in Mr Gourlay’s favour in his unfair dismissal, reasonable adjustments and victimisation claims.  

At the remedy hearing, Mr Gourlay was found to be permanently unable to work and his total financial loss until retirement was assessed to be almost £625,000 (which included past, future, and pension losses). The Employment Tribunal has the power to reduce a claimant’s compensation where it considers that they would have been dismissed in any event. In this case, the Tribunal applied an 80% reduction on the basis that: 

1. Mr Gourlay’s employment would have ended by 31 March 2017, through either mutual agreement due to a breakdown in the working relationship, or through mutual agreement on agreed terms; or
2. Mr Gourlay may have taken early ill-health retirement anyway because of his pre-existing type 2 diabetes and multiple sclerosis.

Having applied the 80% reduction, the Employment Tribunal awarded him just under £125,000. Mr Gourlay appealed this decision to reduce his compensation by 80% to the Employment Appeal Tribunal.

Employment Appeal Tribunal (EAT)

The EAT agreed with Mr Gourlay and overturned the Employment Tribunal’s decision. 

The EAT went as far as saying that the Employment Tribunal had got itself “muddled” and trying to decipher what they had decided and why was “challenging.” The EAT ultimately held that the decision to reduce the compensation by 80% was based on “perverse conclusions and material errors of law”. 

The EAT went back to basic principles and highlighted that the purpose of compensation in discrimination claims is to put the claimant back in the position they would have been had the discrimination never taken place. Having already found that the Council’s discriminative actions had caused an ongoing psychiatric illness which rendered Mr Gourlay permanently incapable of working, the Employment Tribunal had failed to consider the key question: Would a lawful non-discriminatory dismissal have left Mr Gourlay permanently unable to work because of psychiatric injury? If not, meaning that the Council’s discriminatory acts caused the psychiatric injury, then compensation should not have been reduced. 

The EAT also held that the Tribunal’s conclusion that Mr Gourlay’s employment might have ended by mutual agreement by 31 March 2017 was hypothetical and without evidence. The Tribunal had again failed to consider the key question set out in the above paragraph – whether a lawful non-discriminatory dismissal would have resulted in the same psychiatric injury.     

The EAT also ruled that the Employment Tribunal’s conclusion that Mr Gourlay’s diabetes and multiple sclerosis might have forced him to take ill health retirement anyway was pure speculation, and wasn’t based on any medical or factual evidence.   

Accordingly, the EAT determined that the Employment Tribunal had taken the wrong approach when calculating Mr Gourlay’s compensation and should not have reduced his compensation by 80%.  

Comment

Compensation in discrimination claims is uncapped, meaning there is no legal maximum amount that can be awarded against a respondent. In discrimination claims, claimants seem to be increasingly seeking career long losses up to the point of retirement. In practice, career long losses are a high bar and are very rarely awarded by tribunals, and only ever in the most extreme cases where the discrimination has left the claimant permanently unable to work, which was the situation in this case.

Whilst the Employment Tribunal went too far in its role, the Council equally didn’t go far enough. Respondents are often criticised for failing to properly prepare and engage in remedy hearings, perhaps because they don’t see themselves losing so they don’t think they need to or that it would be a waste of legal costs. However, this case is a useful reminder of the importance of prior preparation for remedy hearings because things will not go your way if you are underprepared. If a respondent wants to argue that a claimant’s compensation should be reduced, it needs to provide evidence for its argument. Hypothetical arguments, like the one here that Mr Gourlay might have been forced into ill health retirement anyway, are highly unlikely to succeed without expert evidence. As the EAT made clear, the key remedy question was whether a lawful non-discriminatory dismissal would have left Mr Gourlay permanently unable to work because of psychiatric injury, and the Council provided no evidence on this point meaning there was no basis to reduce Mr Gourlay’s compensation.

If you require any further guidance in relation to discrimination or remedy hearings, please contact a member of the Employment Team.