Court of Appeal allows sacked workers who sue to claim for "stigma loss"

Dismissed employees who are turned down for jobs because they sued their previous employers can claim for 'stigma loss', the Court of Appeal has ruled.

Balbinder Chagger was awarded £2.8m in compensation by an employment tribunal in 2007 following his dismissal on the grounds of redundancy from the Abbey National.

The court heard that Chagger, an accountant, had been working as a 'trading risk controller' alongside a white female colleague in a similar role. One of them had to be made redundant and he was chosen.

The employment tribunal upheld his claims of racial discrimination, unfair dismissal and breach of contract. On appeal, the EAT rejected the Abbey's arguments on liability but accepted them, in part, on remedy.

Giving judgment on behalf of the court in Chagger v Abbey National [2009] EWCA Civ 1202, Lord Justice Elias said that Chagger's original claim was for £300,000, on the grounds that future loss should be assessed over two years.

Later, however, he increased this to £4m on the grounds that as a result of the discriminatory dismissal he had lost his ability to pursue his chosen career. Elias LJ said the following the dismissal, he had applied for 111 jobs, including at the Abbey, where he had offered to work on a voluntary basis. All his attempts to mitigate his loss had failed.

'As far as the stigma contention is concerned, he identified and gave evidence about four specific companies which he believed had refused him employment at least in part because he had taken proceedings against Abbey,' Elias LJ said.

He went on: 'We consider that the original employer must remain liable for so-called stigma loss.'

Lord Justice Elias said he did not accept the Abbey's argument that the fact that third party employers were at fault broke the chain of causation.

'If those employers could lawfully refuse to employ on the grounds that they did not want to risk recruiting someone who had sued his employer and whom they perceived to be a potential trouble maker, we see no reason why that would not be a loss flowing directly from the original unlawful act.'

Elias LJ concluded that stigma loss was recoverable and was 'one of the difficulties facing an employee on the labour market'.

However, he referred the case back to the original tribunal on the grounds that in assessing loss, it should have considered whether to reduce the compensation for future loss to take into account the possibility that Mr Chagger would have been dismissed in any event.

David von Hagen, partner at Westminster firm Winckworth Sherwood, acted for Chagger.

He said that, following the ruling, lawyers in discrimination cases were likely to use the argument that the bringing of claims stigmatised employees and hampered their attempts to mitigate loss.

'I still think tribunals will take a robust and pragmatic view and are going to want hard evidence. They don't make large awards easily in my experience.'

Jo Davis, head of employment at BP Collins, said the ruling would 'encourage the argument that the very fact that people have had to bring proceedings has changed their marketability'.

She said Chagger was working in a 'close-knit market' in the City of London and other claimants would have to show that potential employers knew about their dismissal.

A spokeswoman for the Abbey said the company was pleased that the Court of Appeal had 'recognised in part' the merits of its arguments and the earlier ruling of the EAT.

'There are certain parts of the court's judgment that are in favour of the claimant and Abbey will give serious consideration as to whether it wishes to appeal any of these,' she added.