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Settlement Offers

10 May 2012 #Employment

In the case of Konczac v BAE Systems (Operations) Limited, the Employment Appeal Tribunal (EAT) had to decide whether the Claimant’s ability to recover her losses was terminated by her refusal to accept a settlement offer of £75,000. Did the refusal of an offer amount to a failure to mitigate her loss?

In this case, the Claimant brought claims against her ex-employer for unfair dismissal, disability discrimination and sex discrimination in the Employment Tribunal (ET).  The Claimant was successful in some of her claims and the ET awarded the Claimant £45,000 compensation.  Central to the ET’s decision was the finding that (a) on the basis of the medical evidence, her medical condition and hence her inability to work was caused by the on-going litigation and (b) that on 11 July 2008 the Respondent made a reasonable offer of settlement in the sum of £75,000 which the Claimant ought then to have accepted.  By refusing that offer she failed to mitigate her loss so that no loss of earnings claim persisted beyond that date.

The Claimant appealed against the ET’s decision on remedy.

The EAT decided that there could be circumstances where a Claimant’s refusal to accept a settlement offer is so wholly unreasonable that it breaks the chain of causation.  However, in this case, the EAT held that such circumstances did not exist and she was entitled to pursue her claim.  The Claimant had refused to accept the settlement offer of £75,000 however the Respondent had refused to accept the Claimant’s counter offer of £85,000.  Additionally, the Claimant’s schedule of loss detailed some £500,000 worth of losses and the EAT did not consider that a refusal to accept £75,000 was unreasonable in light of this.

This case highlights that there may be circumstances where a tribunal will find that a refusal to accept a settlement offer is so unreasonable that it terminates the Claimant’s loss.  However, these circumstances are clearly limited.  Parties should ensure that all settlement offers are made on a without prejudice and subject to contract basis to avoid any such disputes at a remedy hearing.


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