No Going Back – Rejection of Promotion Offer Not a Failure to Mitigate

Gibbs -v- Leeds United Football Club concerned the former Assistant Manager of the Club who took his £330,000 constructive dismissal claim to the High Court so as to sidestep the compensation ceiling in the Employment Tribunal.

Having fairly easily established the fundamental breach of contract necessary to win his claim against Leeds, Mr Gibbs then faced two more difficult questions about his compensation. First, how do you provide for mitigation where you know the dismissed employee is going to get a bonus from his new employer, and when, but don’t know how much it will be?  Second, is it a failure to mitigate that the employee declines to accept an offer of improved employment terms from the old employer?

On the first point, the Judge reviewed the options of (i) estimating the bonus figure (but thereby certainly being wrong in one party’s favour of the other) or (ii) delaying the compensation award until the bonus amount were known, but thereby racking up interest charges for Leeds and denying Mr Gibbs receipt of his money. Note that part of the relevant bonus was due to be paid by Mr Gibbs’ new employer, Tottenham Hotspur FC, little more than four months after the High Court’s decision, at a time of low prevailing interest rates and when Mr Gibbs was safely in receipt of a salary from Spurs and so had no immediate need for the money. Nonetheless, this was still felt to be hardship enough all round to leave that option on the bench.

The Judge chose instead to order that:

• the full amount of the £330,000 award should be paid to Mr Gibbs’ solicitors to be held in an interest-bearing account;

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• the parties should then agree how much of that could be released to Mr Gibbs (i.e. leaving at least enough in the account to cover any likely bonus award from Spurs); and

• the rest would be offset against that bonus, with the bonus amount going back to Leeds and the balance to Mr Gibbs, plus interest in each case.

All very sensible and the fact that this was a High Court case in no way prevents a similar Order (or agreement between the parties) being made by the Employment Tribunal where there is a need to reflect an uncertain future receipt in the amount of a settlement or compensation award.

On the second point, was it a failure by Mr Gibbs to take reasonable steps to mitigate his losses when he rejected Leeds’ post-resignation offer to stay at Elland Road as Head Coach/Manager? The Judge gave this allegation a fairly short shrift – having found the Club guilty of a repudiatory breach of Mr Gibbs’ contract, it could not fix things so easily.  Though the new role would have been more senior and presumably better paid, the damage caused to Mr Gibbs’ credibility among players and staff by the Club’s earlier treatment of him made it reasonable for him to refuse.  He could have taken the chance that Leeds would change its behaviour towards him, but he was not obliged to do so.  Bear in mind also the recent Employment Appeal Tribunal decision in Cooper Contracting -v- Lindsey which stressed just how high is the hurdle of showing a failure to mitigate, and also Buckland –v- Bournemouth University in 2010. There the Court of Appeal decided much against its own better judgment that once the employer was guilty of a repudiatory breach of contract, it could not “mend” that breach by profuse apologies and other appropriate steps afterwards, even if those measures would have undone all or most of the harm caused in the first place.