UK: Unfair Dismissal - The £50,000 Limit On Claims

Last Updated: 2 December 1999

The DTI has announced the introduction of the new £50,000 limit on compensatory awards for unfair dismissal.

From 25 October 1999, Employment Tribunals will be able to make compensatory awards of up to £50,000 to employees who have been unfairly dismissed. The current limit on compensatory awards is £12,000.

The change means that any employee whose dismissal is effective on or after 25 October 1999 and who is eligible to bring an unfair dismissal claim may receive a compensatory award of up to £50,000 if his or her claim of unfair dismissal is successful. The compensatory award is on top of the employee's basic award (which depends on age, salary and length of service and is currently capped at £6,600).

Statistics published recently show that the average compensatory award for unfair dismissal awarded by Employment Tribunals during 1998/99 was £2,388 (down from £2,422) in 1997/98. It remains to be seen whether the increase in the maximum will have a real effect on awards. It is most likely to benefit high earners who have a short notice period in their employment contract and those who suffer substantial losses in relation to pension and share option schemes. Tribunals have greater freedom than the Courts to award compensation as they are not limited by the terms of the contract and can award any loss which "flows from" the dismissal.

The DTI has also given details of when other provisions of the Employment Relations Act 1999 are to be brought into force. Further details of these provisions are detailed below.

The provisions include the new framework for parental and maternity leave and the new right to time off work to deal with family emergencies. The DTI has announced that regulations dealing with these issues will shortly be laid before Parliament and are expected to come into force on 15 December 1999.

The following provisions of the Employment Relations Act 1999 are brought into force with effect from 25 October 1999:

  • Tightening up the law protecting employees against discrimination on the grounds of trade union membership or activities (ERA '99, Section 2 and Schedule 2)
  • Ensuring that employees working under fixed term contracts cannot waive their right to claim unfair dismissal at the end of the term (ERA '99, Section 18)
  • Removing the requirement for residential members of religious or religious-type communities to be paid the National Minimum Wage (ERA '99, Section 22)
  • Amending ACAS's general duty, allowing it now to give equal weight to its work on dispute prevention and dispute resolution (ERA '99, Section 26)
  • Rationalising the timetable for ACAS's and the Central Arbitration Committee's annual reports (ERA '99, Section 27)
  • Abolishing the offices of Commissioner for Protection against Unlawful Industrial Action (which has supported only one application since 1993) and of Commissioner for the Rights of Trade Union Members (CRTUM) (ERA '99, Section 28)
  • Extending the powers of the Certification Officer to enable him to determine many of the complaints about breaches of trade union rules and legislation with which CRTUM could previously help (ERA '99, Section 29 and Schedule 6)
  • Authorising the Secretary of State to make funding available to promote partnerships at work (ERA '99, Section 30 and Schedule 6)
  • The extension of the time for prosecuting offences committed after 25 October under the Employment Agencies Act 1973 and regulations made under that Act (ERA '99, Section 31 and Schedule 7)
  • Removing the territorial limits on employment rights, so that the normal principles of international law will apply (ERA '99, Section 32)
  • Simplifying the system of awards and payments made by Employment Tribunals or in redundancies etc. and increasing the limit on the compensatory award for unfair dismissal from £12,000 to £50,000 (ERA '99, Section 33-37)
  • Allowing tax and national insurance contributions data gathered by the Inland Revenue to be used for the enforcement of the National Minimum Wage (ERA '99, Section 30)
  • Amending the Schools Standards and Framework Act 1998 to reflect the reduction in June of the qualifying period for unfair dismissal rights from two years to one (ERA '99, Section 40)

Provisions Taking Effect on 15 December 1999:

New regulations on parental and maternity leave - a simplified framework of maternity rights and new rights to parental leave and to time off work to deal with emergencies affecting dependants. Following a consultation exercise which finished on 4 October, the regulations will shortly be laid before Parliament in draft and - subject to Parliamentary approval - come into force on 15 December 1999. (ERA '99, Sections 7-9 and Schedule 4)

This note is intended to provide general information about a recent development which may be of interest. It is not intended to be comprehensive nor to provide any specific legal advice and should not be acted or relied upon as doing so. Professional advice appropriate to the specific situation should always be obtained.

If you would like further information or specific advice, please contact Sean Lavin at Macfarlanes London office.

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