How does unfair dismissal compensation compare between North America and the UK?

A recent case in Canada saw a jury rule in favour of a Walmart employee in Ontario who alleged she was subjected to “profane and insulting mental abuse” by her store manager from May to November of 2009.

As the jury believed she was forced to resign, this constituted an unfair dismissal. The employee received $200,000 for intentional infliction of mental suffering, up to $1 million for punitive damages and $10,000 for assault. Her employer was forced to pay her $100,000 for intentionally inflicting mental suffering, along with $150,000 for punitive damages.

These high pay-outs may seem excessive, dwarfing wrongful dismissal claims in the United Kingdom, where there are plans to reduce the cap on compensation. In September 2012, Business Secretary Vince Cable proposed to change the maximum level of award to 12 months of an employee's salary. This is part of the employment law reforms designed to reduce the burden of employment law from the employer.

Many commentators believe that the cap on unfair dismissal compensation means employers will have the confidence to hire new people and allow cases to be settled easier, in the hope that employers and employees will part company more amicably, especially in cases where employees are underperforming. Maximum pay outs of £85,200 will instead be replaced by the employee’s average yearly salary, at around £26,000.