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Dispute Resolution I Wrongful Dismissal Notes

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This is an extract of our Dispute Resolution I Wrongful Dismissal document, which we sell as part of our Labour Law Notes collection written by the top tier of Oxford students.

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Dispute Resolution

DISPUTE Abbreviations: EE Employee ER Employer COE Contract of Employment EAT Employment Appeal Tribunal ET Employment Tribunal TU Trade Union D&M Deakin & Morris' textbook FT Fixed term (contract)

RESOLUTION I

DISPUTE AVOIDANCE

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Key part of Employment Act 2002 was desire to reduce tribunal proceedings - encourage alternative dispute resolution. Required EEs to be provided with disciplinary and grievance procedures, laid out by statute in disciplinary and dismissal cases (came into force in Oct 2004) Procedures contained in the Employment Act 2002 (Dispute Resolution) Regulations 2004.

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If EEs didn't first follow grievance procedure, then barred from making claim against ER. If ERs didn't follow disciplinary procedures, then dismissal was auto unfair.

Gibbons Review reviewed these statutory dispute resolution procedures, which were unpopular with ETs. Suggested repeal.
Said there were some benefits - clear steps to be followed; more chance for early resolution.

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BUT unnecessarily high admin burden for both sides, and formalised disputes - need external legal advice from early stage, and expectation that dispute will end in tribunal.
One size does not fit all - might exacerbate problems by requiring smaller ERs to put things in writing/undertake formal procedures. Led to the Employment Act 2008, which repealed the statutory dispute resolution procedures. Rather, now look to ACAS Code of Practice - failure to comply can lead to adjustment of +-25% of award.

ACAS Code of Practice

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General principles of the Code:

1. The Code is meant to help EEs, ERs and EE reps deal with disciplinary/grievance situations at the workplace.

For disciplinary situations, ERs can refer to separate capability procedure if they have one. But must still adhere to basic principles of fairness.

Not applicable to redundancy dismissals/non-renewal of FT contracts.

2. Key principles of fairness and transparency - clear and specific written guidance, and participation in drawing this up. Any formal action must be reasonable and justified, taking into account the sizes and resources of the ER.

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4. Dispute Resolution Elements of fairness:

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Raising and dealing with issues promptly Acting consistently Carrying out necessary factual investigations ER informing EE of issues and allowing EEs chance to respond Allowing EEs to be accompanied, and to appeal against decisions.

What is the role of ACAS? (Advisory Conciliation Arbitration Service)

Governed by Part IV TULRCA 1992 - general duty in s209 to promote improvement of industrial relations. But today, also aim to resolve disputes on unfair dismissal before even getting to ET tribunal stage.

Provides impartial info. Helps to prevent/resolve problems, and settle complaints about EEs' rights (71% being resolved at ACAS stage without even getting to employment tribunal hearing)

Provides possibility of confidential arbitration instead of tribunal

WRONGFUL DISMISSAL General

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Common law action, for which EE can get damages Damages are rarely substantial, for 2 reasons:

1. 2.

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Notice rule: ER usually has right to terminate contract by giving notice - no need to have a good reason for dismissal! EE only entitled to stay in employment for the minimum notice period; can't recover damages for unprotected expectation. Principle of mitigation applies to claim for damages.

Exceptionally, this traditional notice rule may be circumvented by courts' willingness to grant specific equitable relief, or to grant more extensive damages in Gunton-like cases where ER disregarded contractual disciplinary procedures.

Notice Rule

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COMMON LAW

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If CoE is silent on question of termination, it will be taken to be a contract of indeterminate duration - common law implies term of notice, allowing both parties to escape the arrangement. This is of importance especially since the shift away from fixed-term contracts - either party can terminate CoE upon reasonable notice.

McClory v Post Office, 1992: At common law, ER can get rid of EE of indefinite contract, at will, without having to show good reason

But EE will still have claim for damages for breach of contract if ER breached express/implied term (whether procedural or substantive) Paradigm case = dismissal without notice (whether express or implied)

Factors to determine length of notice: period by which wage/salary was calculated; custom in the relevant trade. Now replaced by statutory regulation!
Common law claim of wrongful dismissal is NOT concerned with moral rightness/wrongness hence it entitles ER and EE both to terminate without cause. Remedy for wrong (termination without reasonable notice) is award of damages for period of notice - Johnson v Unisys, 2001.
If contract is for fixed-term, then notice term will NOT be implied - EE just has right to get damages for the rest of the fixed-term period. STATUTE

Minimum continuity of employment = at least one month. Governed by s86 ERA 1996.

The statutory periods are implied into the COE. Actual periods are listed in s86. 2

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Dispute Resolution

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Hill v Parsons, 1972: court will not imply shorter period, but can imply a longer one. These are implied in absence of express notice clause,

If statutory minimum breached - EE can use common law action for damages for breach of contract, subject to mitigation. Minimum floor of rights - prevail over shorter periods in contract!

Note s86(2): if it is EE who wishes to terminate, must give ER at least 1 week's notice. But silent on question of EE's liability for breach.
Does not preclude parties from waiving right to notice/accepting payment in lieu of notice s86(3).
Once notice is given, parties' rights and liabilities governed by s87-91 [wages for normal working hours, but statutory payments by ER (eg. Statutory sick pay/contractual holiday pay) will go to discharging ER's liability]
Implications....

ER only has limited right to EE's future services, while EE only has limited right to job security. Possible for contract to expressly/impliedly restrict ER's right to give notice (eg. Implied from disciplinary procedures). On the other hand, contract may expressly give ER power to dismiss EE without cause. Hence, where contract is "permanent" and silent on notice, presumption that notice clause will be implied according to the normal common law tests, with statute prescribing minimum length. Exceptionally, might be inappropriate to imply notice clause granting ER right to give notice.

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McClelland v Northern Ireland General Health Services Board, 1957: court held exclusion of notice clause from senior health service employee's CoE was deliberate to reflect high level of job security. Contract only included an extensive dismissal procedure. Hence, gave EE right to remain in employment until retirement age, subject only to possibility of dismissal for good cause. Possibility of justified summary dismissal to dispense with notice?

S86(6) ERA: if EE commits repudiatory breach, ER doesn't have to give common law/statutory notice. Can just accept the breach and terminate the contract. This is cos of the bilateral contractual theory of CoE (Photo Production v Securicor, 1980) STANDARD OF REPUDIATORY BREACH: increasing threshold, reflecting changing social values

Insufficient for EE to commit isolated and minor act of disobedience/negligence - must have 'disregarded the essential conditions of the contract of service' (Laws v London Chronicle, 1959), or be 'inconsistent with the continuance of confidence' between EE/ER (Sinclair v Neighbour, 1967).

Might be a series of small breaches, with the final one being the last straw - Pepper v Webb, 1969.

Jupiter General Insurance v Shroff, 1937: privy council case. Must apply standards of men not angels - summary dismissal is a strong measure, justified only exceptionally
- standard can vary depending on business and position of EE in the business.

Neary v Dean of Westminster, 1999: organist and choir secretary of Westminster Abbey summarily dismissed for gross conduct, by taking fixing fees for organising concerts and keeping profits of events. Judge agreed! Conduct here so undermined trust and confidence inherent in an employment contract that master no longer required to retain servant in employment - question of fact.

Must consider (i) character of institution; (ii) role played by EE in institution; (iii) degree of trust required by ER of EE.

Cf Smith v Michelin Tyre, 2007: long-serving EE dismissed for one-off breach of nosmoking policy in factor where there were highly flammable materials (safety). Held that breach justified summary dismissal.

Gosden v Lifeline Project, 2009; also justified where G sent offensive email from home computer to colleague's home computer. 3

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Dispute Resolution

R(Shoesmith) v Ofsted, 2011: case of child abuse/murder. S was head of children services. It was ordered that S be summarily dismissed after an Ofsted Report into the affair. But court said accountability does not mean "heads will roll" - should have been given chance to explain. About competence and capability, no breach of implied term of trust and confidence - given her previous respectable record ER couldn't dismiss summarily. But cannot be allowed where ER itself provokes breakdown of relationship. Knowledge of breach:

Boston Deep Sea Fishing and Ice Co v Ansell, 1888: applies even though ER wasn't aware of breach/seriousness at time of dismissal, and only found out after it dismissed EE. Basically saying that EE has no right to employment since wrongful act anyway!

But note that if ER knew about breach and expressly waived/took no action even after reasonable period, then it would have waived right of summary dismissal. Rationale: affirmed contract, or no genuine causal link between misconduct and dismissal. Note that even if dismissal is justifiable at common law (not wrongful dismissal), it might still be unfair under statute (unfair dismissal) Also, ACAS has isolated some very serious cases of gross misconduct, which allow summary dismissal without the need to respect principles of natural justice.

Damages

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General principles:

EE might have action for wages and other sums provided he rendered work/service on his end.

Depends on whether EE is entitled to these benefits under terms of contract.

If ER wrongfully terminated the contact, EE will NOT have claim for liquidated damages (what he would have earned but for ER's breach), since he didn't actually perform contract so didn't in fact earn the wages. Instead, must sue for damages for breach of contract, to put him in position he would have been in had contract been performed.

Damages will place EE in position he had been in had contract been performed (i.e. Had the notice period been observed). So either get payment in lieu of notice, or payment for the unexpired fixed term (in FT contract).

Where parties envisaged greater return than just pay for hours worked, might get greater damages. Eg. In Marbe v George Edwards, 1928: establishing actresses' name.
Gunton v Richmond-upon-Thames LBC, 1980: damages equivalent to wages EE would have earned between dismissal - end of contract. But assume ER would have brought contract to an end as early as possible, so as to be more beneficial to ER himself. Lost opportunities to earn financial benefits?

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Laverack v Woods of Colchester, 1967: EE couldn't get damages for lost opportunity to earn bonuses - ER not under contractual obligation to give bonus!

Cf Horkulak v Cantor Fitzgerald International, 2004: said Laverack did not apply where there is contractual entitlement to bonafide, rational exercise by ER of discretion whether to give EE bonus. Court can put itself in ER's shoes and decide on figure. Court is then entitled to assume that ER would have exercised its discretion in good faith.

Micklefield v SAC Technology, 1990: entitlement to benefits depended on employment r/s continuing - EE's dismissal deprived him of share options.
**EE who is wrongfully dismissed before the minimum period of service (2 years) to bring unfair dismissal claim CANNOT claim damages for lost opportunity to bring claim.

Harper v Virgin Net, 2004: CA said such claims couldn't be brought otherwise risk rewriting Parlt scheme for UD. EE's duty to mitigate loss

SoS v Wilson, 1978: established need for EE to mitigate loss. Cannot just go home and sit around claiming damages - must go out, look for another job, claim jobseeker allowance and look for alternative work at same pay or better. 4

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Dispute Resolution But no need to accept inferior position/lower pay - Shove v Downs Surgical, 1984 Also don't have to accept job from same ER who just dismissed him - Shindler v Northern Raincoat, 1960. Other awards which may be deducted from damages

Note that any element of statutory compensation for unfair dismissal will be deducted from damages under common law wrongful dismissal, if such elements can be allocated to the heads of damages for wrongful dismissal - but only insofar as such allocation is plausible.
But NOT statutory redundancy payments which represent compensation for loss of established job, not loss of future earnings!
Damages will be further refused to reflect fact that payment accelerates entitlement for the entire unexpired term, which might have been shortened by vicissitudes of life.
****Lost reputation/earning capacity?

Rule used to be NO - can't recover for loss reputation/earning capacity arising from a wrongful dismissal.

Addis v Gramophone Co Ltd, 1909: EE was summarily dismissed and prevented from working out notice, given 6 month's salary (CoE provided for 6 months' notice).

HOL confined his damages to salary for notice period only. Said cannot get damages for

1. 2.

3. Manner in which dismissal took place - covered by unfair dismissal; Injured feelings of the EE; or

Any loss he might sustain from fact that his dismissal makes it more difficult to find subsequent employment - see Malik today.

But there might be distinction between humiliation/injured feelings due to manner of dismissal (because this is not a contract meant to make you happy, unlike contracts for holidays), and economic value of reputation. Still, it is quite difficult to prove a tangible economic loss associated with reputation - EE would have to show that dismissal caused him a loss of employability - see Malik. Doubt came about cos of Malik v BCCI SA, 1997: HOL allowed possibility that EE could recover damages where ER breached implied term of trust and confidence, hence harming EE's future job prospects. Further, EE not barred from claim just because they discovered ER's conduct only after their employment had been terminated.

Said that employment contract provides for EE not just to get wages, but possibly also to increase his employability.

Distinguished Addis, saying it was pre-development of implied term of trust and confidence. But Johnson v Unisys Ltd, 2001, restated the initial rule. Said that Malik could NOT be used to support cause of action for lost reputation resulting from wrongful dismissal (in Malik, EE not wrongfully dismissed!) Reason was that implying duty to act fairly when EE exercised power of dismissal would be contrary to Parlt's intention in establishing statutory unfair dismissal scheme.

This notion that Parlt/statute had occupied the field is highly contentious!

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Edwards v Chesterfield Royal Hospitals NHS Trust; Botham v Ministry of Defence: extended this to deny damages for loss resulting from breach of express clause (disciplinary procedure) Effect of payment of wages in lieu of notice (PILON)

Though there's PILON, it may or may not be a wrongful dismissal!

EE is entitled to waive contractual rights, including right to receive notice. If waived, then dismissal will NOT be wrongful! But for waiver to be effective, it must be given in return for consideration/subject to estoppel.

Hence, if EE voluntarily accepts PILON this will normally discharge his contractual rights against ER. Note EE can give up both right to notice and PILON, in return for some other benefit.

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