Case confirms that damages against employers can include 'stigma loss'

The Court of Appeal has confirmed that a dismissed employee's damages can include compensation for 'stigma loss' where making their claim may deter future employers from offering them a job.

In the case, an employer had applied for 111 jobs, and was on the books of 26 employment agencies, but had been unable to find work, even at lower grades than in his previous job, by the time his case came to the employment tribunal. The tribunal decided the employee would never find another job in his industry again. It awarded him total compensation of almost £2.8m, including compensation for stigma loss.

On appeal, the Court of Appeal agreed that an employer is liable for stigma loss if other employers may be reluctant to take on their ex-employee because they have taken legal action against their former employer. Where stigma loss is part of an employee's loss of earnings claim, as it usually will be, the Court said that tribunals did not have to quantify how much of an award is attributable to stigma loss. However, the Court confirmed that stigma loss can also be the sole claim if there is no loss of earnings (for example, because there has been an unfair procedure, but the employee would have been dismissed anyway). It did ask the tribunal to review the award made, but not on the grounds it included compensation for stigma loss.

Recommendation
Employers should factor in the possibility of stigma damages when considering action against employees who might be viewed as 'troublemakers' by future employers.

Case ref: Chagger v Abbey National plc [2009] EWCA Civ 1202