Polkey v AE Dayton Services Ltd – Legal Landmark Case

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To Polkey or not to Polkey? That is the difficult question.

Introduction:

In the realm of Employment Law, there are landmark cases that have a lasting impact on workplace practices and employee rights. One such case is Polkey v AE Dayton Services Ltd, a legal battle that had significant implications for future unfair dismissal cases and the concept of compensation for dismissed employees.

This article delves into the details of the case, its implications, and its enduring influence on employment law.

Polkey v AE Dayton

Background:

The case of Polkey was heard in the House of Lords (now the Supreme Court) in 1987. The central issue revolved around the fairness of an employee’s dismissal and the extent to which compensation should be awarded when an employer is found to have unfairly dismissed an employee.

Facts of the Case:

AE Dayton was a small textile company that experienced financial difficulties, leading to a series of redundancies to reduce costs. Mr Polkey, an employee with 11 years of service, was one of the individuals dismissed by reason of redundancy. The company failed to follow proper procedures in the dismissal process, resulting in a claim of unfair dismissal by Mr Polkey.

Legal Question:

The main question before the House of Lords was whether a tribunal, when assessing compensation in an unfair dismissal claim, should consider the likelihood of the employee being dismissed fairly if the correct procedures had been followed (known as the “Polkey deduction”).

Decision and Implications:

The House of Lords held that when determining compensation for unfair dismissal, tribunals should take into account the likelihood of a fair dismissal, if the correct procedures had been followed.

Lord Bridge confirmed that in unfair dismissal cases, there are three different possibilities:

A finding that there was no chance of a dismissal regardless of the procedures followed and thus there should be no deduction;
A finding that the employee would have been dismissed in any event if the correct procedures were followed and thus no award of financial loss; or
A finding that a dismissal was not certain but that there was a substantial chance of the same and thus the employee should still be awarded some loss but with a reduction to reflect that possibility.

In other words, the decision in Polkey established that compensation could be reduced if it was found that the employee would have been dismissed regardless of the unfair process followed.

This ruling introduced the concept of the “Polkey deduction,” which allows employers to argue that, even if they had followed proper procedures, the employee would have been dismissed anyway.

It provided a measure of leniency for employers who may have made procedural mistakes but could demonstrate that the outcome would have been the same had they acted fairly.

Importance and Enduring Influence:

The significance of Polkey lies in the balancing act it established between the rights of employees and the practicalities of running a business.

By allowing for the Polkey deduction, the decision recognised that an unfair dismissal does not always warrant full compensation if the outcome would have been the same through fair procedures.

Since the Polkey case, the concept of the Polkey deduction has been applied in various subsequent cases, shaping employment law and tribunal decisions. It has become a vital consideration when determining the amount of compensation in unfair dismissal claims.

However, it is important to note that the Polkey deduction should only be applied if the employer can demonstrate that the employee would have been dismissed regardless of procedural fairness.

Zebrowski-and-Concentric Birmingham Ltd [2017]

In the recent case of Zebrowski, the Employment Appeals Tribunal provided further clarification on the application of a Polkey deduction.

Mr Zebrowski won his claim for constructive unfair dismissal at the employment tribunal (‘ET’). The ET went on to apply a Polkey reduction to the compensation, saying:

“…if a fair procedure had been followed by the respondent there was a 60% chance that the parties would have been unable to resolve the issues relating to the claimant’s health concerns and his working environment and that the claimant’s employment would in any event have terminated fairly by way of resignation/dismissal within two months.”

Mr. Zebrowski appealed against the judgement in respect of Polkey, on the basis that the approach taken by the ET was abstruse.

It was confirmed by Laing J in the case that the ET could either compensate a claimant in full for a certain period of time (of course, subject to mitigation) and after that time period, to reduce the compensation awarded by a percentage, or it may choose to reduce the claimant’s compensation by a percentage throughout the period.

What an ET cannot do is limit the period of compensation AND to apply a percentage reduction to the compensation during that period.

It appears then that that a time limited award is only considered appropriate where the ET is certain that dismissal would occur at a point in the future. If any doubt remains as to whether employment could continue, then a percentage deduction approach is the sole appropriate means of reflecting its uncertainty in that regard.

Conclusion

Polkey has left an indelible mark on Employment Law by introducing the concept of the Polkey deduction. This landmark case recognised that, in certain circumstances, an employer’s procedural mistakes should not automatically lead to full compensation for unfair dismissal.

While striking a balance between employee rights and business practicalities, the case has had permanent influence on ETs, shaping their approach to compensating dismissed employees.

Read our two previous articles in this series here:

British Home Stores Ltd v Burchell

Vento v Chief Constable of West Yorkshire Police