By Stephen Jackson, head of employment law at Harding Evans Solicitors.

Employers need to be aware that the Court of Appeal has offered a potential compensation windfall to employees who are successful in unfair dismissal claims.

Dealing a significant blow to employers, a recent case has decided that not only should Employment Tribunals award compensation for loss of earnings, but they can also award compensation for injury to feelings in all unfair dismissal cases. Such injury to feelings awards were previously restricted to cases involving discrimination.

The case in question relates to Mr Dunnachie, an employee of Kingston Upon Hull City Council. He had begun work with the Council at age 19 in 1986 and by the time he was forced to resign in 2001 was an acting principal environmental health officer in the council's food section.

His line manager had a low opinion of Mr Dunnachie’s capabilities and sought to undermine him whenever possible. The most serious example came when Mr Dunnachie challenged one of his line manager’s decisions. The line manager promptly conducted an in-depth investigation into Mr Dunnachie’s work without telling him that he was doing so. He then threatened him with disciplinary proceedings and left the matter hanging in the air.

To compound matters, the senior manager then failed to alleviate the applicant's anxieties and failed to recognise that the applicant had been a victim of bullying. All of this led to Mr Dunnachie suffering ‘stress’ and ill health. Because he had a family to support, Mr Dunnachie hung on until he found another job to go to and then gave notice claiming constructive dismissal.

This was a bad case of workplace bullying, compounded by a refusal by management to deal with it. As the Court report suggests, “the blow to a conscientious employee's self- esteem which such treatment delivers may well be the unkindest cut of all, worse in many ways than the monetary loss.” Mr Dunnachie had been reduced to a state of despair deserving of compensation - £10,000 out of a total award of £55,000.

An important point to note is that there was no evidence that the employer’s actions had caused their employee any recognised mental illness. An employee cannot normally pursue a more difficult ‘stress’ claim for personal injury without such evidence. But here we have the Court of Appeal opening up a new avenue for employees complaining of ‘stress’.

In very serious cases employers could be paying out in excess of £25,000. This is extremely concerning for employers given that any employee who is dismissed, whether unfairly or not, is almost certain to have injured feelings.

Fortunately, the Court has made it clear that Tribunals may only compensate an employee where there has been real injury to his or her self-respect. This will most commonly be in constructive dismissal cases where an employee feels unfairly pressured or bullied to the point of resigning.

This judgment is already causing an immediate increase in the levels of compensation being claimed. Where the maximum award in ordinary unfair dismissal claims can be in excess of £60,000, specialist advice on such claims will be necessary.

Disclaimer: Professional advice should always be sought when dealing with legal issues. This article does not constitute legal advice and no responsibility can be taken from actions arising from reading this article.