Incapacity Benefit

The EAT has handed down an important decision on compensation for unfair dismissal, in Morgans v Alpha Plus Security Ltd.

It has long been the practice in tribunals to reduce the compensatory award by 50% of any incapacity benefit received by a Claimant. Thus if losses of earnings are £10,000, and the Claimant has received £2,000 in incapacity benefit, his award will be reduced by 50% of £2,000 - i.e. to £9,000.

This rule, known as the rule in Rubenstein v McGloughlin, has now been overturned.

The Employment Appeal Tribunal (Burton P. presiding) has held that tribunals must deduct the ENTIRE amount of incapacity benefit from the compensatory award. To fail to do so would result in a wrongful windfall to the Claimant (para. 22.4). Receiving incapacity benefit, says the EAT, is a form of mitigation of loss (para. 18), and the monies must be deducted in full.

The EAT left open the question of whether a Claimant who fails to apply for incapacity benefit can be said to have failed to mitigate his loss (also para. 18) - a question which will give Respondent representatives some new approaches for cross-examination.

[Thanks to Andrew Knorpel of ASB Law, who successfully represented the employer, for telling me this decision was out]

Morgans v Alpha Plus Security Ltd.