There is no upper limit on the amount of compensation that can be awarded in unfair dismissal or detriment cases under the whistleblowing legislation. Both detriment compensation and the unfair dismissal compensatory award are calculated on the basis of what the tribunal considers just and equitable in "all the circumstances".

In claims for whistleblowing detriment and unfair dismissal, an employment tribunal has the power to increase or reduce the amount of any compensation by up to 25% where either party has unreasonably failed to follow the Acas Code of Practice on Disciplinary and Grievance Procedures.

The facts

Mr Zabelin was Group Chief Investment Officer for SPI Spirits (UK) Ltd ("SPI"), an international wine and spirits company. In March 2020, at the beginning of the COVID-19 pandemic, SPI imposed a 30% pay cut on all employees for a fixed period from April to June 2020. On 3 June 2020, SPI sought to extend the pay reduction with no end date given. On 4 June, Mr Zabelin emailed the group's Chief Human Resources Officer raising concerns about the extension of the pay reduction. A meeting was held on 5 June 2020 at which Mr Zabelin said that the pay cut was a breach of his contract and those of other staff, that the previous pay cut had caused a stressful and toxic environment among employees and could impact their mental health, that the COVID-19 pandemic was being used as an excuse to cut pay without any transparency and that SPI was pressurising, scaring or intimidating employees to agree to the pay cut. At the meeting, they also discussed changes to the claimant's discretionary bonus for 2020. On 8 June 2020, the majority shareholder telephoned Mr Zabelin and spoke of plans to revisit the bonus principles. Mr Zabelin objected on the basis it would not be in accordance with his employment contract, and the majority shareholder orally dismissed him.

Mr Zabelin brought claims against SPI and the majority shareholder for ordinary unfair dismissal, automatic unfair dismissal and detriment on grounds of having made protected disclosures.

The employment tribunal upheld his claims and found that the concerns about the impact of SPI’s conduct on other group employees was enough to get over the public interest hurdle of a protected disclosure for whistleblowing purposes and his dismissal was as a result of that disclosure. As such, he was automatic unfairly dismissed and his compensation was not subject to the ordinary dismissal cap.

Mr Zabelin was awarded £1,626,452 for whistleblowing detriments against both respondents jointly and severally, and a further £3,589 in respect of his automatic unfair dismissal against SPI. These awards had both been subject to a 20% uplift for failure to comply with the Acas Code. He was also awarded £9,000 for injury to feelings.

SPI appealed unsuccessfully against the remedy decision.

Contractual provision

SPI appealed on the basis that the claimant's compensation should have been limited to £270,000. Mr Zabelin's employment contract stated that, in the event of SPI terminating his contract after 12 months' service, he would be entitled to the compensation set out in a separate confidentiality and non-competition agreement, which provided that he would be entitled to £270,000 net compensation. The respondents also argued that that the uplift of 20% for failure to follow the Acas Code should not have been applied.

SPI accepted that the contractual provision was not enforceable as a legal cap on the tribunal award, but nevertheless sought to argue that the existence and context of the contractual provision should be taken into account as a relevant circumstance which might reduce what was just and equitable to award.

SPI also relied on the fact that at the point the contract was entered into there had been meaningful negotiations between parties of equal bargaining power, with Mr Zabelin himself being legally trained and having access to legal advice at the time. The maximum sum he had agreed to was also substantially greater than an ordinary wrongful and/or unfair dismissal claim would have brought him.

However, the EAT rejected SPI's arguments, as to do so would effectively allow an employee to contract out of their statutory rights, contrary to the Employment Rights Act; no ordinary contract clause could pre-limit an employee’s statutory entitlement to appropriate compensation from the tribunal.

Acas code

SPI argued that the Acas Code was never engaged in relation to the protected disclosures as the claimant had not put his grievances in writing. The protected disclosures to which the claims related were only made orally at the meeting on 5 June. However this was rejected by the EAT. They found that the subject of the grievance had in part been raised in the email on the 4 June and the discussion on 5 June had raised "closely related concerns".

In any event, the power to award an uplift also arose on the basis that the disciplinary provisions of the Acas Code were engaged but not fully followed in circumstances where the majority shareholder had lost his patience and dismissed Mr Zabelin without following any procedure as a reaction to Mr Zabelin's stance at the 5 June 2020 meeting.

What does this mean for employers?

This is a reminder to employers that despite what is written in an employment contract an employee will be protected by their statutory rights and it is very difficult to pre-limit compensation.

Employers should also be very conscious to follow the Acas code even when the employee raises their concern orally. You can consider asking the employee to put the concerns in writing or ask them how they would like to proceed but you need to make sure their concerns are addressed.

In dismissal and disciplinary situations the key to engaging the disciplinary provisions of the Acas Code is whether the action is being taken by the employer because of alleged culpable conduct by the employee.

1) SPI Spirits (UK) Ltd 2) Yuri Shefler -v- Vladislav Zabelin [2023] EAT 147