Mitigation

Employment Law: Mitigation of Loss

In the case of Dore v Aon Limited and another, the claimant brought a claim against his former employer for unfair dismissal, disability discrimination and non-payment of wages and commission. Following a hearing considering the evidence, the Tribunal found for the claimant but referred the case to another tribunal for a quantum hearing to determine the level of compensation that should be awarded to the claimant.

Following the claimant's dismissal he did not seek alternative employment but had started his own business. He argued that he had mitigated his losses by attempting to start his own business - for which he took a start up loan to cover his costs.

In their assessment of damages, the Tribunal awarded the claimant compensation equivalent to interest on the business loan he had borrowed. The employers subsequently appealed against the Tribunal's award to the Employment Appeal Tribunal (EAT). The EAT did not alter the award of compensation made by the Tribunal.

The employer further appealed to the Court of Appeal on a point of law, namely that here was no justification for making the award of compensation equivalent to the interest on the claimant's business loan. The Court of Appeal allowed the employer's appeal, and provided that when an employee attempts to mitigate the loss suffered as a result of his or her dismissal, by establishing his or her own business, a tribunal must do the following:

• Ascertain the sum representing the employee's loss of earnings;
• Determine the costs incurred by the employee in mitigating his or her loss - such sum should be added to the figures for the employee's loss, if reasonably incurred; and
• Deduct the earnings from any new work that is started by the employee.

The Court of Appeal found that in this particular case the Tribunal had not given consideration to the employee's loss of earnings from his employment, or his earnings in the new business. The Court of Appeal therefore set aside the Tribunal's compensation award and returned the matter to the Tribunal for reconsideration.

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© RT COOPERS, 2005. This Briefing Note does not provide a comprehensive or complete statement of the law relating to the issues discussed nor does it constitute legal advice. It is intended only to highlight general issues. Specialist legal advice should always be sought in relation to particular circumstances.