Chagger v Abbey National plc and another [2009] EWCA Civ 1202 CA

discrimination | compensation | stigma loss

The Court of Appeal has held that employees who suffer a stigma when looking for a new job as a result of having brought a discrimination claim against a previous employer are entitled to be compensated for their loss by that employer.

Mr Chagger was made redundant by Abbey National plc. An employment tribunal found that he had been unfairly dismissed and discriminated against because of his race. It awarded him £2,794,962.27 (plus interest), with some of this amount being given on the basis that, because he had brought a claim against Abbey National plc, he would never again be able to obtain employment in his chosen field in the financial services industry. The award also included compensation for the employer's failure to comply with an order for reinstatement, compensation for injury to feelings and an uplift for failure to comply with the statutory dispute resolution procedures.

The Employment Appeal Tribunal (EAT) held that the employment tribunal had been wrong to award compensation for the stigma attached to Mr Chagger for bringing a claim against Abbey National plc. The EAT also found that the tribunal should have considered a reduction as set out in Polkey v A E Dayton Services Ltd (formerly Edmund Walker (Holdings) Ltd) [1987] IRLR 503 HL, whereby compensation is reduced to reflect the possibility that Mr Chagger would have been dismissed even if there had been no discrimination.

The Court of Appeal agreed with the EAT in relation to the tribunal's failure to consider a Polkey reduction, but overturned its decision on stigma losses. Mr Chagger's loss should be assessed by asking in what position he would have been had there been no discrimination. The fact that there has been a discriminatory dismissal means that the employee is in the labour market at a time and in circumstances that are not of his or her own making. It is generally easier to obtain employment from a current job than from the status of being unemployed.

In addition, the Court of Appeal said that the stigma attached to bringing proceedings may have had some effect on Mr Chagger's chances of obtaining future employment. It accepted that there was considerable force in Abbey National's arguments that it should not be liable for the discriminatory conduct of third parties that refuse to employ Mr Chagger because of his previous claim and there are powerful policy reasons why employers should not be liable for stigma losses. However, the Court of Appeal went on to say that the House of Lords decision in Malik and another v Bank of Credit and Commerce International SA (in compulsory liquidation) [1997] IRLR 462 HL shows that an employer can be liable for losses resulting from other employers not wanting to recruit its former employees. Stigma losses are in principle recoverable and stigma will normally be a factor to consider when assessing how long the employee will remain unemployed. In cases where there is extensive evidence of attempted mitigation failing to result in a job, the employment tribunal is entitled to conclude that the employee is unlikely to obtain future employment in the industry. The employment tribunal in this case did not have to go into the details of how much of a part the stigma played in the difficulties that Mr Chagger faced in obtaining fresh employment. The only exception where a tribunal might award compensation specifically by reference to the impact of stigma on future job prospects is where this is the only head of future loss.

Case transcript of Chagger v Abbey National plc and another (on the BAILII website)

Go to XpertHR case law stop press.