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Polkey and contribution – Avoiding double penalties on employees by Lydia Banerjee

Polkey and contribution – Avoiding double penalties on employees by Lydia Banerjee

In the recent EAT Case of Lenlyn UK Limited v Kular, UKEAT/0108/16/DM an issue arose over Polkey deductions and deductions for contributory fault.

The facts can be briefly stated.

Mr Kular was employed by Lenlyn UK Limited as a Financial Controller.  In circumstances set out more fully in the EAT and ET decisions there was a failure to manage a contractor leading to a loss in the region of £1.9million.  An external forensic accountant attributed some blame for the loss to Mr Kular.  Mr Kular was informed of the outcome of the report in what was found to be misleading terms.  He was offered a settlement rather than disciplinary proceedings.  Mr Kular resigned and claimed constructive unfair dismissal, detriment for making a protected disclosure and automatic unfair dismissal as a result of a protected disclosure. The alleged protected disclosures related in part to concerns over lack of resources and risks around the particular contractor.

The circumstances of the case were such that Mr Kular established his claim for constructive unfair dismissal but not his whistleblowing claims.  Compensation was then to be considered and the ET considered deductions appropriate both in relation to Polkey and contributory fault.

The Tribunal found that Mr Kular may well have been fairly dismissed following the intimated disciplinary process and that the chance of that happening was 75% (the percentage was a majority decision of the ET with the dissenting member preferring 25%).  In the circumstances compensation would be reduced by 75%.

In addition the Tribunal found that Mr Kular’s conduct contributed to his dismissal and they assessed his contribution as 30%.

As a matter of law it is open to a Tribunal in principle to make both a Polkey deduction and a contributory fault deduction.  That principle was established in Rao v Civil Aviation Authority [1994] ICR 495.  In each case the question which must be asked is whether it is appropriate to do so on the facts of the particular case.

From the decision of the ET it was not clear that the ET had considered whether it was appropriate to make both deductions. The factors relied upon for the Polkey deduction and the contributory fault deduction overlap significantly.  There is therefore a real risk of double-counting with the Claimant being penalised twice for the same conduct.

The obvious lesson arising from this case is that where Polkey and contributory fault deductions arise Tribunals need to clearly articulate the factors which lead to their decisions and, to the extent that the factors are the same, they need to consider and articulate whether, and if so why, both deductions are appropriate.

For those representing Respondents arguing for both deductions assistance can be provided to the Tribunal by clear submissions identifying relevant factors to the two tests.  There may well be overlap but there are also important differences.  It is suggested that procedural issues should be identified separately from the conduct itself. 

Those representing Claimants and facing such challenges to compensation would do well to remind the Tribunal of Rao v Civil Aviation Authority and of the need for them to carefully consider whether double-counting is likely to occur.

Given the sequential way in which the deductions are applied to the calculation and the overall question of what is just and equitable there are plenty of arguments for the parties and Tribunals need to be clear in their thinking and reasoning to ensure that appropriate penalties are applied.

Mr Kular was represented by Michael Duggan QC in his successful cross-appeal that has led to the issue of both deductions being referred back to the Tribunal with an opportunity for him to try to reduce the percentages awarded.

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