EAT holds that statutory cap on contractual payments means that employee was not entitled to receive statutory redundancy pay (Mrs S Ugradar v Lancashire Care NHS Foundation Trust UKEAT/0301/18/BA)
In the case of Mrs S Ugradar v Lancashire Care NHS Foundation Trust UKEAT/0301/18/BA the Employment Appeal Tribunal (“EAT”) considered whether the Employment Tribunal had been correct when they refused to pay a Claimant a statutory redundancy payment in addition to her contractual redundancy payment.
The facts in Ugradar v Lancashire Care NHS Foundation Trust
Mrs Ugradar (the ‘Claimant’) was employed on ‘Agenda for change’ terms and conditions by Lancashire Care NHS Foundation Trust (the Respondent’). Section 16 of those terms and conditions provided for a contractual redundancy payment. Whilst the definition of redundancy and the conditions of qualification broadly mirrored the statutory scheme set out in Part 11 of the Employment Rights Act 1996, it allowed for a payment of one month’s pay for each complete year of service.
There was an express provision in the contract governing the relationship between the contractual payment and the statutory payment. It said: ‘NHS contractual redundancy is an enhancement to an employee’s statutory redundancy entitlement; the statutory payment being offset against any contractual payment.’
The Claimant’s post at the Respondent’s disappeared in a reorganisation. The Respondent put forward various positions which they felt constituted suitable alternative employment, but all of them were rejected by the Claimant as not, in fact, being suitable. Her employment was terminated by the Respondent and she did not receive a redundancy payment. She brought a claim in the Employment Tribunal (“ET”) for both the contractual redundancy payment and the statutory redundancy payment.
The decision of the Employment Tribunal
The Claimant was entitled to an enhanced contractual redundancy payment of £43,949.04 under the provisions of her contract of employment.
The ET found that the Claimant was entitled to the payment as she had reasonably refused the Respondent’s offer of alternative employment, which was not suitable, but capped her award at £25,000 by virtue of the statutory cap which applies to contractual claims being heard in the ET. It declined to order the Respondent to pay the Claimant a statutory redundancy payment of £5,868, relying on the clause in the Claimant’s contract of employment which stated that the statutory payment was to be offset against the enhanced payment.
The Claimant appealed to the Employment Appeal Tribunal.
The decision of the Employment Appeal Tribunal
At the EAT, the Claimant relied on the case Eden v Skills and Works Solutions Limited to argue that the statutory cap did not apply to a statutory redundancy payment.
The Respondent attempted to argue that as the Claimant had already pursued a cause of action and obtained a judgment, she was precluded from bringing an additional claim in respect of the same cause of action and relied on the case Fraser v HLMAD Limited. It argued that the full contractual payment, which included the statutory element, was one cause of action, effectively one claim for a redundancy payment which included two elements.
The EAT agreed with the Claimant and said that she was entitled to be paid the statutory redundancy payment, in addition to the contractual payment which was capped at £25,000. The held that the case Fraser v HLMAD Limited did not apply in this case as there was, in fact, two separate causes of action, not just one. The Claimant was entitled to the statutory payment, even in her contract of employment had attempted to restrict her rights to that payment.
The Claimant’s contractual payment was £43,949.04 and the Respondent was entitled to set off against that figure the amount of £5,868.00 which was the statutory payment. Therefore, the actual amount the Claimant was entitled to was £38,071.04. The statutory cap of £25,000 had to be applied to that figure, but it did not apply to the statutory payment, which the Claimant was entitled to receive as well.
Our solicitors’ views on the case of Mrs S Ugradar v Lancashire Care NHS Foundation Trust
Sacha Barrett, a Senior Associate in the employment department at Redmans, made the following comments on the case: “This case highlights that the statutory cap of £25,000 which has stayed the same for twenty-five years, needs to be increased. At its current level, there is a real risk that it will not adequately compensate some employees for the financial losses they have suffered in a breach of contract claim.’
The decision of the Employment Appeal Tribunal in Mrs S Ugradar v Lancashire Care NHS Foundation Trust UKEAT/0301/18/BA can be found here.