Polkey v A.E. Dayton Services Ltd [1988] ICR 142, HL is an important House of Lords decision. The main points it establishes are so fundamental that the case merits its own Main Heading in this programme.

Brief facts of Polkey

Polkey was an unfair dismissal case in which an employer had failed to consult an employee about impending redundancy. The House of Lords held that the failure to consult was itself enough to make the dismissal an unfair dismissal.

The House of Lords rejected the employer's argument (which followed principles established almost ten years earlier by the EAT in British Labour Pump Co Ltd v Byrne [1979] ICR 347, EAT) that since consultation would not have made any difference to his decision to dismiss the employee the dismissal was fair. Overruling British Labour Pump v Byrne, the House of Lords held that this argument was irrelevant for deciding whether a dismissal is fair or unfair, although it is relevant in assessing compensation.

The Polkey case establishes:

• that a dismissal can be unfair purely on procedural grounds
  
• that an employee has an absolute right, save in exceptional circumstances, to be consulted before being dismissed notwithstanding that consultation would make no difference to the decision to dismiss him
  
• that where a dismissal is unfair purely on procedural grounds a tribunal can reduce the compensation to the claimant, or eliminate it completely, in proportion to the likelihood that the dismissal would have gone ahead even if the correct procedure had been followed.

Main further principles emerging from case law

The points noted above have been expanded by further case law. The following are among the main further principles which have emerged:

• An unfair dismissal for conduct can be unfair purely on the basis of a procedural failure but if the tribunal is satisfied that the employee's conduct was such that they would have been dismissed in any event they may apply Polkey and reduce the compensatory award, for an example see Mofunanya v Richmond Fellowship and anor EAT 2003 on 15th December 2003.
  
• if a dismissal was unfair but it was likely that the employee would have been made redundant shortly thereafter regardless of the reason for the 'unfair dismissal', a Polkey reduction to compensation may be appropriate as redundancy is a potentially fair reason for dismissal and compensatory award is intended as compensation for loss and is not meant to enable an employee to, in effect, make a profit (see for example Compass Group UK & Ireland Ltd t-a ESS Support Services Worldwide v Baldwin, EAT 2006 on 5th January 2006).
  
• It is unnecessary and unproductive, in unfair dismissal cases, to debate whether a particular piece of conduct on the part the employer fits into the "substantive" as opposed to the "procedural" category (see Lambe v 186 Ltd CA 2005 ICR 307, Court of Appeal on 29th July 2004 and notes at Unfair dismissal/procedural defects ). Older cases such as Dunning AJ & Sons v Jacomb NIRC 1973 ICR 448 in which emphasis was placed on whether a matter was one of substance rather than procedure are therefore generally no longer relevant .

Basic calculation of a 'Polkey' reduction

The compensatory award which an employer might be ordered to pay in a "Polkey-type" unfair dismissal case will normally be calculated either

1. by reducing the award by a percentage to take into account the degree of likelihood that the employee would have been dismissed anyway if fair procedures had been followed (on the whole this approach may be more likely to benefit the employee); or
   
2. by "the length of deferral" approach, under which the tribunal will consider how long the dismissal would have been put off if a fair procedure had been followed, say four weeks, and then award an amount equal to net pay for that period (on the whole this approach may be more likely to benefit the employer).

Although tribunals can use two week's pay as a "conventional" rule of thumb award for lack of consultation where dismissal would have happened anyway this is not a rigid rule and compensation should be calculated on a "just and equitable" basis as required by ERA 1996 s.123. In Elkouil v Coney Island Ltd EAT 2002 IRLR 174 ten weeks pay was awarded whereas in Sagoo v Weatherseal Holdings Ltd, EAT on 25th July 2002, the award was one week's pay (and see notes at Unfair dismissal/compensation calculation/contributory conduct by employee ).

See also Redundancy/consultation and/or Unfair dismissal/fair or unfair? and/or Consultation with employees .