Tribunal compensation: benefits, mitigation and avoiding double recovery

Adrian Fryer

How should an employment tribunal deal with state benefits when calculating compensation for loss of earnings? The answer is more nuanced than simply deducting whatever benefits an employee was entitled to receive during the relevant period.

The EAT’s decision in SBH Windermere v Nunns provides a useful illustration of the compensatory principles involved, and of the interaction between benefits and an employee’s duty to mitigate their loss.

The compensatory principle

Mr Nunns succeeded in several harassment claims and was awarded compensation including six months’ loss of earnings.

The tribunal initially deducted Universal Credit which it anticipated he would receive during that period. However, the compensation award itself would take Mr Nunns’ capital above the £16,000 threshold for Universal Credit. In reality, therefore, he would not receive the benefit which had been deducted from his loss.

On reconsideration, the tribunal increased the award. The EAT upheld that approach. Deducting a benefit which the claimant would not ultimately receive would leave him under-compensated for his actual financial loss.

That reflects the underlying compensatory principle: the objective is, so far as money can achieve it, to put the claimant in the financial position they would have occupied but for the unlawful conduct, rather than to apply a purely mechanical calculation.

But what about mitigation?

There was, however, another side to the calculation.

The employer argued that Mr Nunns could have claimed New Style Jobseeker’s Allowance or New Style Employment and Support Allowance. Unlike Universal Credit, entitlement to those benefits was not dependent upon his level of savings.

Once the tribunal revisited its treatment of benefits, the EAT held that it also needed to address this argument. The case was therefore remitted to consider whether Mr Nunns had failed to mitigate his loss by not claiming alternative benefits.

Whether a benefit should be deducted because it has actually been received is a different question from whether a claimant has acted reasonably in mitigating their loss by pursuing benefits potentially available to them.

Why does this matter for employers?

When evaluating remedy and settlement exposure, employers should avoid treating benefits as an automatic deduction from loss of earnings. The relevant questions may include what the claimant actually received, whether an award affects continuing entitlement, and whether other benefits could reasonably have been claimed.

Nunns is ultimately a reminder that tribunal compensation is concerned with actual loss. Both sides of the equation matter: a claimant should not be under-compensated by deducting benefits they will never receive, but nor should potentially reasonable steps to mitigate loss simply be ignored.

Contact Adrian Fryer, Senior Partner and Head of Employment.