Compensation and Damages: What is the difference?

15 Sep 2014 4 min read Employment Alert Article

In the recent judgment of the Labour Appeal Court (LAC) in the case of South African Airways v Van Vuuren (Unreported) Case Number C 9/13 handed down on 12 June 2014, the LAC considered the distinction between compensation and damages. The complainant in the matter claimed R100 000 in damages, the court awarded an amount in excess of R1.4 million, with only R50 000 being awarded in damages.

Section 50(1) of the Employment Equity Act, No 55 of 1998 (EEA) grants the court the power to make any appropriate order including one for compensation and damages in any circumstances contemplated in the EEA.

This is repeated in s50(2) referring specifically to claims of unfair discrimination. The judgment considers the fact that often the words compensation and damages are used interchangeably due to there being ambiguity relating to the meanings of the words. This would naturally affect the discretion of the court in awarding claims for damages and compensation.

The court considered that the term compensation as used in s193 of the Labour Relations Act, No 66 of 1995 (LRA) encompasses both patrimonial and non-patrimonial loss, thus failing to draw a distinction between damages and compensation. The EEA however, draws a distinct difference between the 2 concepts. While the Oxford dictionary definitions of the two concepts define both to mean compensation for loss or injury the court states that this could not be what was intended by the drafters of the EEA as they specifically mention the two separate terms. The court therefore holds that the only conclusion that may be drawn is that the term damages refers to patrimonial loss and the term compensation refers to non-patrimonial loss.

The court held that in an Aquilian action in order for damages to be awarded the claimant must prove the actual loss suffered. The purpose of this is to restore the claimant to the position he would have been in had he not suffered the damage. Compensation on the other hand, is solatium offered in order to make right injured feelings of the claimant.

The court concludes that this is the manner in which the EEA seeks to distinguish damages from compensation. Thus it would be possible in certain circumstances to award both damages and compensation. The court has a discretion in this regard. The award of both damages and compensation must be appropriate and just and equitable in the circumstances. Damages therefore are intended to restore the complainant to the position he or she would have been in but for the unfair discrimination and compensation is intended as solatium for the complainant's impaired dignity or injured feelings.

The court held that the determination of fairness and appropriate relief requires a balancing of the interests of the employer, the employee and the public in general. The court relied on the judgments of the courts in the cases of Christian v Colliers Properties (2005) ILJ and Alexander v Home Office [1988] IRLR 190 (CA) to conclude that while an award for discrimination must not be minimal, due to the fact that it is impossible to assess the monetary value of injured feelings, the award should be restrained. The awarding of excessive sums does as much harm to society as the awarding of minimal sums.

The court went on to hold that the court a quo had awarded an excessive sum. The court based its conclusion on two legs, firstly that the claimant had claimed far less than what was awarded by the court and secondly that the award of compensation bore no reasonable relationship to the injury and humiliation suffered by the claimant.

The court further went on to examine previous cases of discrimination based on age. In the case of Evans v Japanese School of Johannesburg [2006] 12 BLLR 1146 (LC) the court awarded R180 000 in damages for patrimonial loss and R20 000 compensation for injured feelings. In the case of Bedderson v Sparrow Schools Education Trust [2010] 4 BLLR 363 (LC) the court awarded no damages as the complainant had not claimed damages and R42 000 in compensation being the amount of 6 months' salary. In the case of Hospersa obo Venter v SA Nursing Council [2006] 6 BLLR 558 (LC) the court awarded R135 000 in damages for patrimonial loss and R40 000 - R45 000 compensation.

The court therefore awarded the complainant R50 000 in damages for patrimonial loss and R50 000 compensation for non-patrimonial loss. The court specifically stated that the non-patrimonial loss must be a stipulated amount and not monthly salaries so as to avoid awarding high earning individuals more compensation than those that earn less even though the injury suffered by the latter was greater.

Therefore it is evident that a court granting an award of damages and compensation for unfair discrimination must distinguish between the two concepts. Furthermore, when determining the amount of compensation to be awarded the court must take into account the effect of such award on society. The court is also required to be consistent in its awards for compensation for non-patrimonial loss so as to ensure that the compensation granted to high earning employees is not greater than that awarded to low earning employees merely by virtue of the fact that the former earns a higher salary.

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