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Our October 2026 edition provides an update on the Employment Rights Act 2025 reforms after more commencement regulations and an updated implementation timeline have been published. We also provide a round-up of recent case updates, including some interesting cases on aggravated damages and interim relief, a decision clarifying that individuals can be liable for a failure to make reasonable adjustments, and a stark reminder about responsible use of AI in the Employment Tribunals.
Case law update
Compensation – aggravated damages: Aggravated damages are a potential remedy for the distress caused by the manner or motive behind the committed wrong, and a recent appeal against an award is a helpful reminder of key principles on when it is appropriate. The Employment Appeal Tribunal (EAT) clarified that aggravated damages is a compensatory rather than punitive award and is premised on there being an aggravating factor causing increased injury which has not already been compensated for in, for example, an injury to feelings award. The EAT observed that double-counting is a risk where a separate award for aggravated damages is made and that, accordingly, a single award for injury to feelings to encompass the effect of any additional aggravating acts is often preferable. (Khans Solicitors v. Kaiser)
Compensation – mitigation of loss – benefits: Where state welfare benefits are a consideration in compensation calculation, these should not be looked at in isolation. In this case, the claimant was awarded six months’ loss of earnings, but credit was given for the universal credit (UC) he would have received in that period. When the claimant indicated that this award would take him over the savings limit for UC, the Employment Tribunal (ET) reconsidered its calculations and increased his award to reflect his inability to claim UC. On appeal, the EAT concluded this was the wrong approach – whilst the ET was entitled to reconsider the award because of the UC issue, it should also have considered what other non-means-tested benefits were available to the claimant to mitigate his losses. (SBH Windermere v. Nunns)
Disability discrimination – compensation: An employee with ADHD who was dismissed five months into a temporary maternity cover role, purportedly on performance grounds, has been awarded over £200,000 for direct disability discrimination, discrimination arising from disability, and a failure to make reasonable adjustments, after a liability judgment found that it had “rarely seen such a clear causal link between a protected characteristic and a dismissal, nor such an unsatisfactory explanation from a respondent”. As well as compensation for financial losses, the claimant was awarded an upper band award for injury to feelings and £30,000 for personal injury because of the significant adverse impact that the discriminatory treatment and dismissal had on her, as well as aggravated damages of £5,000 largely because the respondent had inexcusably failed to disclose vital evidence – a “smoking gun” for the claimant’s claim – until the day before the hearing. In addition, the ET ordered the former employer to pay the claimant’s legal costs in full, an exception to the usual rule that parties bear their own costs. (Ghiotto v. Hawkwell House Hotel Ltd)
Disability discrimination – reasonable adjustments: In a surprising and controversial decision, the EAT has decided that a claim for a failure to make reasonable adjustments can be brought against individual respondents such as a line manager, rather than just the employer. The EAT held that as the duty to make reasonable adjustments rests on the employer, and the employer acts through its employees, it follows in the EAT’s view that where an employee fails to make reasonable adjustments for which the employer is vicariously liable, the employee responsible for the failure can also be personally liable. This could prove to be a landmark decision unless it is overturned on appeal. (Merriman v. 1st Staff Limited and others)
TUPE: The Court of Appeal has unanimously concluded that vicarious liability to a third party does not transfer under TUPE. In this case, a psychiatric patient claimed personal injury for abuse by hospital staff whilst she was an inpatient, although those hospital employees subsequently transferred to another employer. The judgment leaves the claimant without recourse – the employer at the time of the alleged incidents was placed into liquidation, its insurance coverage did not respond because of excess arrangements, and liability did not transfer under TUPE. (ABC v. Huntercombe (no.12) Ltd and others)
Employment Tribunals – AI: In an appeal against the strike out of his claim for conducting proceedings in a scandalous, vexatious, and unreasonable manner, the claimant presented a 300-page AI-generated skeleton argument for a preliminary hearing, prompting the EAT to provide guidance on responsible and ethical use of AI in ET proceedings. The EAT reminded parties, whether represented or not, to ensure compliance with relevant procedural rules, take personal responsibility for verifying the output (and not, like in this case, putting the onus on the respondent to check for factual errors), and keep content relevant and focused. In this case, the claimant’s document was deemed wholly unacceptable, serving to “obscure rather than illuminate” the issues. (Hancox v. Sutherland and others)
Interim relief: Interim relief is a powerful remedy which requires a dismissed employee’s former employer to continue paying the claimant their full pay and benefits on an interim basis until the claim is determined at a hearing. Even where the claimant’s claim fails, the employer cannot recover the salary and benefit payments made to the employee pursuant to the order. It is a rare remedy, awarded exceptionally in a limited number of automatically unfair dismissal claims where the claimant can meet a high “likely to succeed” threshold. The EAT has recently clarified that the mere existence of a factual dispute is not determinative or indicative that a claimant does not meet the required threshold – in considering an application for interim relief, an ET should make a quick summary assessment based on the evidence available. Even if the facts are disputed, clear evidence that the “real” reason for the claimant’s dismissal was different to the one purported may be sufficient. (Duffy v. Bxtr 3 Ltd t/a House of Gods) Following an upward trend in applications for interim relief in the ET, guidance was issued in June 2026 explaining its emergency nature and limited availability as a remedy.
Equal pay: In an important case for employers grappling with UK equal pay litigation based on work of “equal value”, a retailer who paid its warehouse operatives more than its predominantly female retail sales consultants has successfully appealed against the employees’ successful equal pay claim. The EAT concluded that recruitment and retention factors affecting warehouse staff, which did not apply to retail staff, could justify the higher basic pay rates. The retailer’s appeal in respect of differential rates for paid breaks, overtime, and night-time premiums was not successful. (Next Retail v. Thandi and others)