Cooper Contracting Ltd v Lindsey
Although it is not perhaps the most exciting legal principle, the duty for a claimant to mitigate their losses remains an important one in every case where compensation is sought. Employment tribunals should always consider the issue of mitigation when awarding compensation. It is often difficult to precisely calculate the value of a claim at its outset as the extent and effect of mitigation is at that stage, often very difficult to judge.
Fortunately the former President of the Employment Appeal Tribunal, Mr Justice Langstaff, has recently reminded us of the main legal principles concerning mitigation in the case of Cooper Contracting Ltd v Lindsey.
Mr Lindsey was employed by Cooper Contracting as a carpenter. He was dismissed by Cooper Contracting and a tribunal found that his dismissal was unfair. Mr Lindsey was awarded compensation based on his loss of income from his dismissal up to the date of the hearing as well as future loss of earnings for three months.
After he was dismissed Mr Lindsey had become self-employed despite the fact that there were still better paid employment opportunities “out there” as the judge surmised. Mr Lindsey preferred to be self-employed and the judge found that it was his decision to deal with the financial ups-and-downs that self-employment can bring.
The judge concluded that a sensible approach would have been for Mr Lindsey to be self-employed for a period but when better paid employment opportunities arose then Mr Lindsey should have taken these opportunities. As a result the Tribunal limited his future losses to three months. In other words, the tribunal ruled Mr Lindsey had mitigated his losses flowing from the dismissal and compensation was rightly awarded.
Appeal and decision
On appeal to the EAT the employer argued that Mr Lindsey had failed to mitigate his losses because he had chosen to be paid less while self-employed when there were “other opportunities out there for employed work with higher remuneration if the Claimant wished to look for them”.
The EAT agreed with the original tribunal that in choosing to take up self-employment Mr Lindsey had not acted unreasonably and had not failed to mitigate. Dismissing the appeal the EAT summarised the following principles on mitigation:-
- It is not for the claimant to prove that he or she has mitigated his or her loss, but instead the burden of proof is on the wrongdoer, i.e. the employer, and that it must be proved on a balance of probabilities that the claimant had acted unreasonably. Therefore if no evidence is adduced by the former employer of a failure to mitigate, then the tribunal has no obligation to make any findings on mitigation of loss.
- The claimant must be shown to have acted 'unreasonably', not necessarily 'not reasonably'. There is an important distinction to be made here.
- The determination of unreasonableness is a question of fact, taking account of the claimant's views and wishes, although this assessment is objective.
- The employment tribunal should not put claimants on trial as if losses were their fault.
- A failure to take better paid work is not necessarily unreasonable and does therefore not automatically satisfy the test.
The decision follows earlier authority and accords with the advice which we give clients when facing tribunal claims: as soon as they receive notification of a claim, to start collating evidence of the availability of suitable vacancies and possibly evidence from recruitment agents as to the local job market. This evidence can then prove very useful to an employer if they wish to argue at a remedy hearing that a claimant has failed to mitigate their loss and acted unreasonably in not applying for suitable vacancies.
This case illustrates well the practical advantage for employers to identify early on, after becoming aware of a claim or proceedings, the availability of suitable vacancies in order to be able to understand commercially the likely value of the claim being faced. Doing so will allow decisions over the appropriate defence strategy to be made more easily.
Consistent with our policy when giving comment and advice on a non-specific basis, we cannot assume legal responsibility for the accuracy of any particular statement. In the case of specific problems we recommend that professional advice be sought.