Unfair dismissal compensation capped at £49,992 after redundancy with restrictive covenants

When a redundancy dismissal leads to a six-figure claim

This case shows how a seemingly straightforward redundancy dismissal can become a significant compensation claim when the employer's conduct after dismissal hinders the employee's ability to find a new job. The head of investments was made redundant in May 2021 after three and a half years' service. The employer conceded unfair dismissal early on, so the tribunal's focus was on compensation.

The key issue was mitigation of loss. The claimant's contract contained broad restrictive covenants that prevented him from working in similar roles. Despite his requests, the employer refused to waive them and even threatened legal action if he breached them. This left the claimant in a difficult position: he could not easily find a new job in his field without risking a lawsuit. He took on consultancy work, earning £27,700, which reduced his loss.

What the employer could have done differently

The employer could have avoided this outcome by conducting a fair redundancy process and, crucially, by waiving or narrowing the restrictive covenants. By refusing to do so, they effectively blocked the claimant from mitigating his loss, which increased the compensation they had to pay. The tribunal accepted that the claimant's fear of breaching the covenants was reasonable, given the employer's threats.

Why this matters for similar claims

This case is a reminder that compensation for unfair dismissal can be substantial, especially when the employer's actions after dismissal contribute to the employee's inability to find work. Employees should document all attempts to mitigate their loss, including requests to waive covenants. Employers should think carefully before imposing restrictive covenants on departing staff, as they can backfire in tribunal. The £49,992 award here was the maximum possible under the statutory cap, reflecting the full year's loss after mitigation.