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Redundancy Pay Cap

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If an employee claims contractual and statutory redundancy payments at a tribunal, does statutory redundancy pay count towards the £25,000 cap for a breach of contract claim?

No, held the EAT in Uradar v Lancashire Care NHS Foundation Trust.

The Claimant’s enhanced contractual redundancy entitlement was £43,949.04, contractually deemed inclusive of statutory redundancy pay (here £5,868). After dismissing the Claimant in a redundancy exercise, the Trust refused to make any redundancy payments, asserting that it had offered suitable alternative employment. The tribunal upheld the employee’s entitlement to both statutory and contractual redundancy pay, the latter payment capped at £25,000 by the limit in the Extension of Jurisdiction Order 1994. The tribunal held that the statutory redundancy pay was ‘subsumed’ with the contractual claim, so awarded £25,000 (not £25,000 + £5,868).

The EAT held that the tribunal erred in law, there were two causes of action, statutory redundancy pay and breach of contract. The doctrine of ‘merger’ found in wrongful dismissal claims whereby tribunal and (uncapped) civil court claims can’t both be brought did not apply; the right approach here was to award £25,000 for breach of contract and £5,868 for statutory redundancy pay.

The EAT commented that the £25,000 cap on contractual claims, unchanged since 1994, could be raised by a statutory instrument, and that the present cap can produce real injustice and was out of step with the wider powers of tribunals in other areas.

Thanks to Ed McFarlane of Deminos HR for preparing this case summary.