The change on 29 July meant that Employment Tribunals can only award £74,200 or one year's pay (whichever is the lower) by way of a compensatory award in ordinary unfair dismissal claims. The cap does not apply where the dismissal is due to whistleblowing or the employee raising certain health and safety issues or where the dismissal is discriminatory.
The founder of Compromise Agreements Ltd, Alex Monaco, argues that the newly introduced cap will adversely affect older workers on lower incomes, as they are more likely to be awarded compensation in excess of one year's salary due to difficulty in finding alternative employment.
Compensation Agreements Ltd claims that this will end up causing the Government more money in benefits where a claimant is unable to find work for a period over one year but can only receive compensation for only one year of this. CA Ltd contends that the "BIS Impact Assessment is fundamentally flawed in its analysis of the impact the imposition of the cap of one years’ salary would have on older people".
The claim was issued on 25 October and the Government is due to respond by 29 November 2013.
I think this is very unlikely to get very far having regard to the level of awards that Employment Tribunals make and the way that they calculate awards. Prior to the cap of one year's pay being introduced Employment Tribunal awards in excess of £30,000 were made in a relatively small proportion of cases. Given that the average salary in the UK is only £26,000 the effect of the cap is not likely to make a significant difference in practice.