The Court of Appeal in England and Wales has very recently held in Chagger v Abbey National Plc and another [2009] EWCA Civ 1202 that an employee may recover compensation for stigma suffered as a result of his having brought discrimination proceedings against a former employer, where this stigma can be shown to have affected his ability to obtain another job. Although this is an English case, it raises interesting issues not yet considered under Australian law.
Mr Chagger, a chartered accountant, was employed as a trading risk controller and was dismissed for redundancy by his employer, Abbey. He successfully brought a claim for unfair dismissal, race discrimination and breach of contract, and was awarded £2.8 million in compensation by an employment tribunal on the basis that he would not be able to obtain further employment in his chosen field. On appeal, the Employment Appeals Tribunal held that even though Mr Chagger had shown that he was unable to obtain a similar job because of the stigma connected with bringing proceedings (Mr Chagger had applied for 111 roles and been considered for more) it would be wrong to make Abbey liable for the unlawful actions of third party potential employers.
Historically, since Addis v Gramophone Co Ltd [1909] AC 488, it had been settled law that an employee was not entitled to additional compensation for the manner of his/her dismissal; in that case a manager was not able to obtain compensation for the difficulty of obtaining employment as a result of having been wrongfully dismissed.
However, in what many call an "unorthodox" decision the Court of Appeal overturned the ruling of the Employment Appeals Tribunal holding that Abbey could be liable for the stigma associated with Mr Chagger having to bring his claim.
In the case of Malik v BCCI [1997] ICR 606, HL, employees of BCCI were able to claim stigma damages for loss caused by the way in which their employer had conducted its business in breach of the implied term of trust and confidence in their contracts of employment. In Chagger the Court of Appeal recognised that Malik concerned a different kind of stigma but stated that Malik shows "that the mere fact that third party employers are the immediate cause of their loss, does not free the original wrongdoer from liability" and held that stigma loss was in principle recoverable stating that "it is one of the difficulties facing an employee on the labour market".
The Court of Appeal stated that stigma loss need not be a separate head of loss, but would be considered as part of the evidence when assessing how long an employee will be out of work. A "sensible and robust" approach was urged, with an employee requiring compelling evidence of prejudice such as Mr Chagger's "very extensive evidence of attempted mitigation" in order to be successful. The court also confirmed there would be instances where tribunals could order compensation specifically by reference to stigma; namely where it is the only head of loss (for example where an employee would definitely have been dismissed even if there had been no discrimination as he would have been on the job market at the same time as a lawfully dismissed employee). The court contemplated an award of a modest lump sum in such circumstances.
The extension of the position in relation to compensation for stigma in Chagger is very significant. It means that an employee who has difficulty finding alternative employment due to the publicity of a discrimination claim may have a very wide remedy of damages based upon career loss, as against an employer who discriminates against him or her. This is problematic for employers, particularly in situations where employees or their representatives court publicity as a means of putting pressure on an employer to settle the claim. This tactic becomes an act that is possibly in their direct economic interest.
If this approach is taken in Australia, it would likely have a significant impact on the way employers respond to complaints of discrimination by employees. The change in judicial attitude to the position of third party wrongdoing breaking the chain of causation is especially troubling, as it leaves the employer who discriminates (perhaps only in a technical defect of process) indemnifying the ex-employee for the future wrongful acts of third parties. Employees' representatives may start including stigma claims in proceedings as a matter of course, in order to increase the pressure on employers to settle. The cost of discrimination just got a lot higher for employers in the United Kingdom.
Employers in Australia should continue to treat allegations of discrimination by employees seriously and seek advice when necessary.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
