Wrongful dismissal

It is easy to think that now there is a law on unfair dismissal that this is the full story about employees’ rights under the law where their contract of employment is ended. Wrongful dismissal is a common law concept and it basically means dismissal other than in accordance with the contract of employment; dismissal in breach of contract in essence.  As this usually means giving the statutory period of notice it may not seem like it is particularly valuable.  But this is not always so.  It all depends on what the contract of employment actually says.  The contract may state that dismissal can only occur where ‘good cause’ or sufficient grounds are made out.  Statutory notice periods are a legal minimum but the contract can give the employee greater rights.  As we will see unfair dismissal compensation is not exactly megabucks. Market forces sometimes enable some well qualified employees to command a better deal. 

One rarely learns about Premiership football club managers taking a football club to an employment tribunal for unfair dismissal if they are sacked. This is because they are often given a very substantial sum in compensation when their contracts are terminated, far in excess of the statutory maximum for unfair dismissal.  Sometimes this is not a contractual requirement as such, it just appears to the club to make good business sense to end the relationship as amicably as possible and not to acquire a reputation for dismissing managers too quickly.  Sometimes the contract will specify that a sum will be payable on termination. 

How much this is dependent on economics can be seen from the recent industrial tribunal proceedings between the local football club Glentoran and a former manager. This is a club that simply does not have the funds to pay the kind of severance package the Jose Mourinho’s of this world can command.  So, the first thing to do when advising a dismissed employee is to go to their contract and see what they are entitled to.  If it is something like minimum statutory notice then you will be thinking about unfair dismissal. If it is significantly more unfair dismissal may not be worth pursuing.

At common law it is possible to dismiss an employee summarily, i.e. without notice, if the employee commits a very serious breach of contract.  Usually this will be gross misconduct but it can be anything the contract says justifies summary dismissal.  If something relatively trivial is stated in the contract to be a ground for summary dismissal there will probably not be a case of wrongful dismissal and the employee will not be entitled to the remedy for wrongful dismissal.  But this could constitute unfair dismissal because the latter does not require proof of breach of contract.  Note, however, that proving breach of contract, will often help to make out a case of unfair dismissal.  

Remedies for wrongful dismissal

There are a few other issues to do with remedies for wrongful dismissal. Sometimes an employee might be entitled to a bonus for excellent performance, usually if in the opinion of the employer this is deserved.  The decision of the Court of Appeal in Horkulak v Cantor Fitzgerald [2004] EWCA Civ 1287; [2005] ICR 402 confirms that the employee has a right to a bona fide and rational exercise of discretion by the employer about the award of the bonus.  The reason for mentioning this now is because when an employee is dismissed there may be an issue about potential entitlement to a bonus.  The dismissal could be a way to avoid paying a bonus.  It may be for reasons unconnected to the employee’s right to the bonus.  In either case the employee might be entitled to their bonus along with any other payment received on termination of employment.

Damages for distress

The decision of the House of Lords in Addis v Gramophone Co Ltd [1909] AC 488 that no compensation is payable for the humiliating manner of a dismissal is still good law. The argument has been made that a sham or fix disciplinary process prior to dismissal while the contract of employment was still alive could constitute a breach of the implied obligation of mutual trust and confidence.  However the decisions of the House of Lords in Johnson v Unisys Ltd [2003] 1 AC 518 and of the Supreme Court in Edwards v Chesterfield Royal Hospital NHS Foundation Trust [2011] UKSC 58 appear to doubt whether it is possible to treat the disciplinary process as distinct from the manner of dismissal.

Specific performance

There can be no specific performance of a contract of employment – TULCRA 1992 section 236.  So there can be no court ordering striking employees back to work or requiring an employer to take a dismissed employee back.  The old case of Lumley v Wagner (1852) 42 ER 687 indicates that an employer could potentially get an injunction to stop an employee from breaching their contract of employment by going to work for another. This does not in terms compel the employee to perform their contract of employment, it just prohibits working for another.  The employee may choose to go back to employer 1 or not work at all.  But as the practical effect of the injunction will so often be to compel the employee to work for the original employer these injunctions are hardly ever granted.

 Unfair dismissal

There has been much dissatisfaction with the remedies for unfair dismissal. Usually only compensation is awarded and this is modest.  At common law damages would usually be just notice pay.  So it is attractive to try and prevent dismissal from taking place. Following on from Lumley v Wagner it now appears that an employee may get an injunction to restrain an employer from dismissing without going through the disciplinary process first. In West London Mental Health Trust v Chhabra [2013] UKSC 80 the Supreme Court granted an injunction to require a disciplinary process which was operating improperly to be terminated and re-commenced.  If this process is properly managed the employee might not be dismissed.  If it is a sham then we run into the Johnson v Unisys and Edwards v Chesterfield Royal Hospital issue above.  If the employee is dismissed there is no remedy that can reverse the effect of this.

Societe General v Geys [2013] 1 AC 523

What is the position if an employer summarily dismissed an employee when the employer is not entitled to do so?  This issue arose in Societe General v Geys [2013] 1 AC 523.  The employee turned up for work one day in November 2007, whereupon he was frogmarched to the front door of the building and told never to return.  In January 2008 the employer exercised its contractual right to dismiss the employee. For two months a surreal cat and mouse game went on between the two parties which resolved no issues between them. The issue before the Supreme Court was when the contract of employment terminated, automatically in November 2007 or when the employer exercised its contractual right to dismiss in January 2008?  If January 2008 the employee would accumulate an annual bonus of €650,000. The Supreme Court held that contracts of employment were no different from other contracts. A repudiatory breach such as the one the employer committed in November 2007 did not automatically end the contract.The employee had the same choice as any other innocent party to elect between affirmation and termination. An examination of communications passing between these parties during the cat and mouse game described above could not be treated as the employee accepting that the contract was terminated. So it was only terminated when the employer exercised its contractual right to terminate in January 2008 and Mr Geys was entitled to his bonus. It should not be thought, however, that neither affirming nor terminating for an indefinite period will keep the contract alive indefinitely. There will come a time when the employee will be treated as accepting that the employment is over. Because of the bonus it was possible to treat this contract as subsisting until the employer decided to end it.