In the recent case of SPI Spirits (UK) Ltd v Zabelin, the Employment Appeal Tribunal (EAT) considered whether a contractually agreed compensation payment due on termination of employment should be applied to cap an award for unfair dismissal and whistleblowing.
Facts
Mr Zabelin was Group Chief Investment Officer for a wine and spirits company, SPI Spirits UK Ltd (SPI). In March 2020, SPI imposed a 30% pay cut on all employees for a fixed period from April to June 2020. In June, they sought to extend this period indefinitely. Mr Zabelin emailed HR raising concerns about the pay cut as well as changes to his discretionary bonus scheme. In a subsequent meeting, he complained that the cut was a breach of his contract, had caused great stress amongst employees, and that the pandemic was being used as an excuse to cut pay. He was dismissed shortly afterwards.
Mr Zabelin brought claims for unfair dismissal and whistleblowing. The tribunal upheld the claims and awarded him £1,626,452 for whistleblowing detriments and a further £3,589 for his automatic unfair dismissal claim. These awards had a 20% uplift for failure to comply with the Acas Code. He was also awarded £9,000 for injury to feelings.
SPI appealed against the decision on the amounts awarded. Mr Zabelin’s employment contract provided that he would be entitled to £270,000 net compensation if SPI were to terminate his contract after 12 months’ service. SPI argued that any award to him should have been capped by way of his employment contract.
Decision
The Employment Appeal Tribunal dismissed SPI’s argument, explaining that the wording of the contractual provision did not cover any potential award given by a tribunal but instead only entitled the employee to a guaranteed contractual payment on termination after 12 months’ service. This amount had been agreed in consideration for Mr Zabelin entering into post-termination restrictive covenants.
The EAT went on to say that even if the clause had the meaning hoped for by SPI, the cap would be unenforceable as it was void under the Employment Rights Act 1996. The Employment Rights Act allows for the tribunal to award any amount which it deems "just and equitable". The EAT held that it would not be "just and equitable" to disapply this statutory provision.
Comment
Given the very clear restriction on contracting out in the Employment Rights Act 1996, it is not surprising that a contractual provision would be void were it to seek to cap a tribunal award.
Another interesting point in this case, was the application of the 20% uplift for a failure to comply with the ACAS code of practice on disciplinary and grievance procedures. Although the dismissal in this case was for whistleblowing (and not obviously a grievance or disciplinary situation) the ACAS code was found to apply. The EAT said “Where the employer dismisses or takes other action against an employee because, in substance, of what it regards as, or potentially as, culpable conduct, the discipline provisions of the code will apply.” This is another case that shows the wide ambit of the ACAS procedures.
Frances Rollin
Dominic Northey