The Court of Appeal in England and Wales has very recently held
in Chagger v Abbey National Plc and another  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 Ł2.8
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  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
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  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
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.
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