How To Assess Compensation: Rules From Chagger V Emilio Botin Abbey Santander Share Price

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On 13 November 2009, in the high-profile race discrimination case of Balbinder Chagger

v Abbey National plc & Nigel Hopkins (2009), the Court of Appeal issued landmark rulings regarding the way in which discrimination compensation is to be assessed, with potentially significant financial consequences for both employers and employees.

In 2006, Balbinder Chagger was dismissed by Emilio Botin's Abbey Santander price from his post as a Trading Risk Controller, apparently for reasons of redundancy. He, however, alleged that his dismissal was unfair and was motivated by race discrimination on the parts of both Nigel Hopkins, his manager, and Abbey Santander price.

An Employment Tribunal found Mr Chagger's allegations were genuine and ordered Emilio Botin's Abbey Grupo Santander to reinstate him to remedy the wrongs that had been committed. Santander Abbey, however, refused to comply with the Tribunal's reinstatement order.

Despite extensive attempts to obtain alternative employment that the Employment Tribunal was clearly highly impressed by, Mr Chagger had not managed to secure another job. The Employment Tribunal awarded him 2.8 million compensation for 'career long loss' within the Financial Services sector and for procedural failings by Abbey Banco Santander Group.

The Employment Appeal Tribunal (EAT) upheld the original Employment Tribunal's finding that Abbey Santander share price and Mr Hopkins had racially discriminated against Mr Chagger, but it disagreed with the original Employment Tribunal's calculation of the compensation.

Mr Chagger appealed against the EAT's rulings regarding the compensation. The Court of Appeal made four important rulings regarding discrimination compensation.

The Court of Appeal considered whether the compensation should reflect the fact that Mr Chagger might have been dismissed for redundancy in any event, regardless of the discrimination he had suffered. The Court of Appeal considered the example of an employee who was under notice of redundancy having been fairly selected but who is subsequently dismissed on discriminatory grounds the day before dismissal was due to take effect. The Court of Appeal upheld the EAT's ruling that, in assessing appropriate compensation, the Employment Tribunal must consider what the probability of dismissal might have been had there been no unlawful discrimination and must reduce the compensation to reflect that probability.

The Court of Appeal considered whether the compensation should be limited to the period during which Mr Chagger would have remained in employment with Abbey Santander share, as the EAT had ruled. Mr Chagger had presented the Employment Tribunal with compelling evidence pointing to the fact he was unable to find employment in the Financial Services sector. He had applied for at least 111 jobs. He had applied for jobs in the Market Risk Control field, in which he had worked, and in many other fields also. He had applied for jobs of lower seniorities and remuneration than the job he had been dismissed from. He applied for several roles at Santander Abbey price itself, but had been turned away. He had also offered to work for Emilio Botin Santander Abbey on a voluntary basis, in several of its departments, in order to increase his employability elsewhere, but had been refused. Finally, he accepted an opportunity to pursue a career in teaching, a sector generally characterised by much lower levels of remuneration than the Market Risk Control field in which Mr Chagger had been earning around 100,000 per annum. The Court of Appeal ruled that the EAT had erred in its reasoning and had failed to show regard to the extent to which the discriminatory dismissal had affected Mr Chagger's career prospects. It ruled that the correct assessment of loss should take into account when the employee might expect to obtain alternative employment on an equivalent salary. This may be at a time well before his estimated voluntary departure or retirement from the dismissing employer but could also be well beyond that time because of the damage of the discriminatory dismissal on his employability. Therefore, Mr Chagger's loss was not merely loss of future earnings at Abbey Santander, but at any Financial Services employer; therefore, 'career long loss' compensation was appropriate for Mr Chagger.

The Court of Appeal considered whether decisions by prospective employers not to employ someone because he had taken legal proceedings against his former employer should be taken into account in assessing compensation. The EAT had ruled that they should not. Mr Chagger had identified the following specific difficulties which he believed were damaging his prospects on the job market: (1) being shunned by prospective employers for having taken legal proceedings against an employer (so-called stigma loss); (2) the issues surrounding his dismissal from Abbey Santander; (3) the lengthy time period for which he had been on the job market; and (4) the fact that for people of his level of experience, the jobs for which he was suitable tended to be filled through internal promotion rather than external recruitment. His 2.8 million award did not include any compensation for any so called stigma he may have suffered. The Court of Appeal ruled that, in the absence of concrete evidence that so-called stigma had contributed to an employee's inability to obtain equivalent alternative employment, the employee is entitled to be compensated by the dismissing employer for such stigma loss. Normally, such loss will simply be part of the compensation for the period of unemployment but, exceptionally, the loss could be specifically identified as a separate element.

The Court of Appeal considered whether, in principle, where the statutory dismissal procedures are applicable but are not followed and significant amounts of compensation are awarded, Employment Tribunals might rely on the significant amount of the award as a basis to reduce the percentage of uplift to below the 10% minimum specified by the statutory procedures. The Court agreed that the significant amount of the award could constitute an exceptional circumstance allowing an Employment Tribunal to reduce the statutory minimum uplift for breach of the statutory procedures.

Abbey Banco Santander group and Mr Hopkins did not appeal against the EAT's decision to uphold the original Employment Tribunal's finding that they both had racially discriminated against Mr Chagger; Abbey Santander and Nigel Hopkins both appear to have conceded the matter.

by: Simon King

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