Elaine Aarons, principal in the employment team at City law firm Withers LLP, on when (and why) banks pay huge compensation to departing executives.
Public perception as to the size of claims employees can bring when their employment ends seems to be 'the sky's the limit'. Whilst six or seven-figure settlements get reported in the press, who can reasonably expect to be in that league, and what is it that holds other employees back?
When should employees be prepared to accept they only have a relatively modest claim?
If the employee just has a regular unfair dismissal claim, even if he/she wins, compensation will be capped at 60.6k, plus what is called a basic award (maximum 9.3k). So unfair dismissal isn't going to give you a six-figure claim.
Moreover, most of the compensation you can claim in the employment tribunal relates to loss of earnings. If you are going to get an equivalent or better job pretty quickly, then your claim will not be that big.
Which claims could lead to large awards?
Employees who can expect to claim big money are those with claims for uncapped compensation who are also going to find it very difficult to get their career back on track.
There are a variety of uncapped claims. Those that come up most often are discrimination, equal pay and whistleblowing. Claims arising because you have not been paid the bonus you should have been paid can also be very substantial.
Six types of discrimination claim can be brought nowadays, but claims that relate to discrimination on the grounds of gender, race and disability remain the most common. However, these will only give rise to substantial claims if employment has already ended or it is inevitable that it will.
Equal pay claims enable an employee to claim differential in pay going back for six years, and occasionally longer. This can cover disparity in basic salary but also in bonus. These can be the most complex and time-consuming claims depending on how they are framed.
Whistleblowing claims are also surprisingly common. This involves making a disclosure to your employer about something illegal/unlawful. The net was cast wider in 2002 when it was held that an employee who claims his/her employment contract has been breached is a whistleblower. The difficulty is usually showing that the reason the employee was dismissed was because he/she made the whistleblowing disclosure concerned - and not some other reason.
What is the typical outcome?
The vast majority of these claims settle before a tribunal case is heard. Some settle before tribunal proceedings are even issued. Some employers see the sense in settling rather than getting engaged in a time-consuming dispute that will distract management from getting on with more constructive things. Others dig their heels in and prefer to show that they are not a walk-over. Everything will turn on the quality of the evidence, but with a reasonably good case, in all likelihood the case will settle.
There are always obstacles to be overcome but the success rate for employees who genuinely have an uncapped claim are pretty good. The aim is to ensure your settlement exceeds the legal fees incurred by enough to justify having got into a dispute with your employer in the first place. This means working with a lawyer who is experienced, candid and strategic, and who you get on with - it's almost inevitable you're going to spend a lot of time together!