Mitigating Losses

In awarding compensatory awards in unfair dismissal cases, Tribunals will look at what efforts the employee has made to mitigate their losses and whether he or she has taken all reasonable steps to reduce the loss.

If it transpires that the employee has failed to take such steps, such as turning down a suitable alternative position, the compensatory award can be reduced. 

This was highlighted in the case of Kelly v University of Southampton where, on appeal, the EAT upheld the Tribunal`s decision that the employee had failed to mitigate her loss by failing to apply for two alternative posts within the University.

The Tribunal had been entitled to arrive at the conclusion that the employee was extremely likely to have been successful for either of the alternative roles.  In reaching this decision, the Tribunal relied on evidence regarding her length of service, her qualifications and the circumstances surrounding her previous dismissal.

Employers may find of interest the following three step approach to determine deductions for failure to mitigate losses, which was recommended in an earlier case of Savage v Saxena (1998):- 

• Identify what steps should have been taken by the employee to mitigate their loss;
• Find the date upon which steps would have produced an alternative income;
• Thereafter reduce the amount of compensation by the amount of income which would have been earned.