Chagger v Abbey National plc and anor
Employees can sometimes be stigmatised for bringing a claim against their employer. In Chagger v Abbey National plc and anor, the Court of Appeal has said that employees who find it impossible to get another job because they brought proceedings against a previous employer, are entitled to be compensated for that “stigma loss”.
Tribunal and EAT decisions
Following his dismissal on the ground of redundancy in April 2006, Mr Chagger successfully brought a claim of race discrimination and unfair dismissal. At a subsequent remedies hearing a few months later, he claimed damages of £4,000,000, arguing that no one else in the financial sector would now employ him because of the stigma attached to taking legal proceedings against Abbey.
The tribunal agreed and awarded him £2,794,962.27 to compensate for future loss, Abbey’s refusal to comply with an order for reinstatement, injury to feelings, and a two per cent uplift as a result of the company’s failure to comply with the statutory disputes procedures.
The Employment Appeal Tribunal (EAT), however, said that the tribunal should have applied the “Polkey” principle and asked whether Mr Chagger would have been selected for redundancy in any event. “That required consideration of the question whether dismissal might have occurred even had there been no discrimination”.
As for future loss, the EAT said it should be limited to the period Mr Chagger would have remained with Abbey, had there not been any discrimination. It also held that the tribunal should not have made Abbey liable for any “stigma loss” suffered by Mr Chagger since that resulted from the conduct of other, “third party employers” and was not the direct consequence of anything that Abbey itself had done.
Court of Appeal decision
The Court of Appeal agreed with the EAT that tribunals must ask what would have happened had there been no unlawful discrimination. Tribunals must assess the chances of a claimant being dismissed lawfully and reduce the compensation to be awarded accordingly.
The EAT was wrong, however, in its approach to assessing future loss. Instead, this should be decided by estimating when he might expect to get another job on a salary equivalent to his Abbey salary. As Mr Chagger had made extensive efforts to find another job, including those at a lower grade, which were all unsuccessful, the tribunal had been entitled to assess future loss “on the basis of loss of career.”
As for “stigma loss”, the Court of Appeal said, relying on the decision of the House of Lords in Malik v BCCI, that the original employer must remain liable for it. Although Malik concerned a different kind of stigma, the Court concluded that “the mere fact that third party employers are the immediate cause of the loss does not free the original wrongdoer from liability”.
The Court made clear that, in most cases, stigma loss would not need to be considered as a separate head of loss and would “simply be one of the features which impacts on the question how long it will be before a job can be found”. In cases such as this where Mr Chagger tried endlessly, but failed, to get a job, the tribunal was entitled to conclude that he would be highly unlikely to find another job in that sector.
In exceptional cases, however, tribunals were able to award compensation specifically referring to the impact of stigma on future job prospects, even if it was the only head of future loss. For instance, in cases where a tribunal found that the claimant would definitely have been dismissed even if there had not been any discrimination. In that scenario however, stigma would likely be just one difficulty in obtaining another job and therefore it may be appropriate to simply award a modest lump sum.