Polkey v A.E. Dayton Services Ltd

Polkey v A.E. Dayton Services Ltd [1988] AC 334

Facts

A van driver who claimed his firing was unjust filed an appeal. The employment tribunal had determined that even if the employer's decision to fire the employee was not reasonable at the time of the firing, it might nevertheless be determined to be fair when viewed in the context of the information available at the time of the firing.  According to the evidence presented to the tribunal, the employer might have rationally chosen to fire the employee if he had adhered to a fair process.

HELD

Even if the employer had violated the law's code of conduct, this did not automatically make the dismissal unjust, depending on the situation. British Labour Pump Co v. Byrne (1979) ICR 347 and all decisions that followed it, in particular W & J Wass Ltd v. Binns (1982) ICR 486, were determined to be in conflict with the Employment Protection (Consolidation) Act of 1978 and should be overturned. When determining whether a dismissal was unjust under the 1978 Act, it was important to examine both the cause for the dismissal and the elements of the method of the dismissal. The Court of Appeal had incorrectly relied on events that had taken place after the dismissal judgement had been made. They mixed up unfairness against the employee, which was not a part of unfair dismissal but would be important in determining the compensating amount, with unreasonable employer behaviour, which is a component of unfair dismissal. Appeal allowed and case remitted to a new tribunal for rehearing.

Comment

After the ruling made by the House of Lords in the case Polkey v. AE Dayton Services Ltd, this reduction has continued to be known as the Polkey reduction. A decrease in the amount of compensation awarded to an employee who successfully sued their employer for unfair dismissal. This reduction is meant to represent the probability that the employee would have been terminated in a fair manner regardless of the outcome of the lawsuit.

Following Polkey's proposal to construct a need for procedural fairness in dismissal, an effort was made in 2002 to change the Employment Rights Act 1996 in order to provide a legislative foundation for procedural fairness. This was done in response to Polkey's recommendation. This effort at legislative codification was overturned by the government in 2008, and they have since gone back to relying on the case law that was established in Polkey.