The House of Commons the Tribunals (Maximum Compensation Awards) Bill 2010-11 will receive its second reading.

The Bill seeks to ensure that all compensatory awards, including awards for unfair or wrongful dismissal or discrimination arising out of employment, will be subject to a maximum limit of £50,000. Martin Warren, partner and Head of the HR group at international law firm Eversheds, comments:

 
“Currently the compensatory award for unfair dismissal is restricted, with a few limited exceptions, to £68,400. An employee can also be awarded a basic award of up to £12,000. As such, a £50,000 limit represents a significant reduction and will be unpopular with trade unions and many employees. It will however be popular with employers who have seen the compensatory award rise relentlessly over the years.

“In contrast to unfair dismissal claims where there is a cap on the maximum compensation which can be awarded, compensation for discrimination claims is currently uncapped. This, combined with the fact that there is no minimum period of employment required to qualify for protection, fuels “have a go” claims in the view of many employers. Furthermore, the government has recently consulted on the possibility of increasing the qualifying period for unfair dismissal to two years. If it goes ahead with these plans (and the Government’s response to the consultation is expected anytime), this could well lead to a rise in discrimination claims by employees dismissed with less than two years’ service who are looking for a way to sue for compensation. This is because discrimination claims need no minimum qualifying period of service so an employee can complain that the dismissal was unlawful discrimination on grounds of age, sex, race, disability, religion or belief, or sexual orientation.”

“However, there is a European law hurdle facing the Bill to the extent it seeks to cap discrimination awards: the Equal Treatment Directive requires our UK laws to provide adequate remedies for discrimination. Discrimination compensation in this country used to be subject to the same cap as unfair dismissal compensation and in 1993 the European Court of Justice ruled that this was unlawful. As a result, it is difficult to see how the supporters behind this Bill can realistically deliver a £50,000 limit while also complying with European law. A formula, for example two years pay rather than a cap for all claims irrespective of earnings, might be a safer route legally.”