Damages for dismissal
Labour & European Law Review Weekly Issue 256 16 February 2012
The law allows employees to claim compensation for unfair dismissal in certain circumstances, but can they claim damages if dismissed in breach of a contractual disciplinary procedure? In the conjoined cases of Edwards v Chesterfield Royal Hospital NHS Foundation Trust; Botham v Ministry of Defence, the Supreme Court said that they can’t, even if they’ve been dismissed in breach of an express term of their contract.
Mr Edwards, a consultant orthopaedic surgeon was summarily dismissed for gross personal and professional misconduct.
He issued a claim for wrongful termination of his employment contract, arguing (among other things) that the disciplinary panel should have included a clinician of the same discipline, as set out in the terms of a policy that formed part of his contract. Arguing that if it had, he would not have been dismissed and claimed damages for lost earnings (past and future) of over £3.8 million.
Mr Botham, a youth and community worker, was charged with gross misconduct in relation to two teenage girls and summarily dismissed. He was also placed on a list of people deemed unsuitable to work with children, known as the POCA list.
He successfully claimed unfair dismissal in the Employment Tribunal, and then issued proceedings for damages for breach of the express terms of his contract on the ground that the MoD had failed to follow the correct disciplinary procedure. As a result, his reputation had been ruined and he could no longer work as a community worker.
Supreme Court decision
The Supreme Court held, however, that employees cannot recover damages for loss at common law following a breach of an express contractual term because of the so-called “Johnson exclusion zone”.
The decisions of the House of Lords in Johnson v Unisys Ltd and Eastwood v Magnox Electric plc made clear that employees cannot bring claims for damages for breach of the implied terms of trust and confidence arising from dismissal. That is, unless it was a direct result of the employer’s failure to act fairly leading up to the dismissal and “precedes and is independent of” the dismissal process.
Although employees have the right to bring unfair dismissal claims, the Supreme Court emphasised the “significant limitations” that Parliament had placed on that right. For instance, the three-month time limit for bringing a claim and the cap on the level of the compensatory award.
As Parliament had decided to provide employees with a remedy which was less generous than that which the common law would ordinarily give for breach of contract, it could not therefore have intended to allow employees to bring claims that would effectively circumvent those restrictions and limitations.
It concluded that unless the parties said something different, “they are taken not to intend that a failure to comply with contractual disciplinary procedures will give rise to a common law claim for damages. This is regardless of whether the term is express or implied”.
It is a matter of fact whether individual cases fall within the Johnson exclusion area and depends on whether the procedural breach forms part of the dismissal process. In this case, Mr Edwards’ dismissal flowed from the panel’s ‘erroneous’ findings, which flowed from its improper constitution. Likewise, Mr Botham alleged that the loss of reputation was caused by the dismissal itself. Both cases therefore fell within the Johnson exclusion area.
A seven-member Supreme Court disagreed about this one. Lady Hale’s judgement is most interesting, showing some of the logical anomalies which the majority view entrench. The overall outcome, however, is no surprise, and we can safely put this decision back on the shelf and move onto more pressing concerns.