Deductions from Compensation – Polkey

During the course of your employment claim you may hear or read about ‘Polkey Deductions’ from your compensation. Lawyers and those involved in employment cases will regularly throw this term around and it is important that you understand what it means and the effect that it could have on your claim.

Polkey deductions or reductions are named after a House of Lords case – Polkey v AE Dayton Services Ltd – from 1987.

Basically a Polkey deduction is a reduction in your compensation if you are successful in a claim for Unfair Dismissal. The reduction is made where the Tribunal decide that your dismissal was unfair but that you would have been dismissed fairly in any event, had the Employer followed a fair procedure.

The most likely scenario where a Polkey reduction will be made is in a redundancy situation, and this was true of the Polkey case.  Mr Polkey was employed by AE Sayton Services Ltd for 4 years until he was told that he was being made redundant. Unfortunately his Employer failed to follow any procedure or consultation with him. As a result the Employment Tribunal decided that he had been dismissed unfairly. There were various appeals until the case reached the House of Lords.

The House of Lords was the UK’s highest Court of Appeal until July 2009 and so their decision in Mr Polkey’s case concluded matters and provides authority for all other Courts and Tribunals to follow.

The House of Lords decided that although Mr Polkey’s dismissal had been unfair his compensation should be reduced to reflect the fact that had the Employer followed the correct redundancy procedure then Mr Polkey would have been dismissed anyway.

In your case if the Employer’s failure is merely procedural or there is a reason why you would have been dismissed anyway your compensation will be reduced by a percentage, which can be by up to 100% in some cases, or alternatively the Tribunal will place a cap on your future loss of earnings.