What is the difference between wrongful dismissal and unfair dismissal? Employment law expert Carole Thomson sheds light on the fine detail for confused employers.
Who can hear a wrongful dismissal claim?
Prior to 1994, wrongful dismissal cases were heard exclusively by the courts. But since 1994, employment tribunals can also hear a wrongful dismissal case as long as they do not award more than £25,000, with courts still able to award greater amounts.
If a claim is more than £25,000, employees will need to lodge claims in a court and not in an employment tribunal.
The time limit for bringing a wrongful dismissal claim to a county or high court is six years, a tribunal is three months from the effective date of termination subject to the right to extend limits.
The underpinning law
Most legislation coming out of the 1960s and 70s provided statutory employment rights like unfair dismissal. But there is no specific legislation devoted to wrongful dismissal. It is basically a branch of the ‘law of contract’ which comes from what we know as common law – an older contractual concept.
Other legislation will have an impact on a wrongful dismissal claim. For example, if you look at the Employment Rights Act 1996, this gives statutory notice periods and may therefore affect any damages for a wrongful dismissal claim. Similarly, there is other legislation such as jurisdictional and taxation issues that may affect a wrongful dismissal claim.
But basically, the term ‘wrongful dismissal’ is really just a name given to a contractual claim where there is an allegation that there has been a breach of either the oral or written terms of an employment contract by an employer, and this that led to the dismissal of an employee.
Failing to give the correct contractual or statutory notice is the most frequent claim seen for wrongful dismissal. This includes where an employer dismisses an employee without providing adequate compensation in lieu of notice.
Key differences in unfair and wrongful dismissal claims
Unfair and wrongful dismissal claims are often confused, but they are entirely different. First, an employee needs two years of continuous employment to make an unfair dismissal claim, unless one of the automatic exceptions apply. But an employee needs no ‘qualifying period of employment’ for a wrongful dismissal claim.
An unfair dismissal claim is statutory, so can only be heard within an employment tribunal, not the normal civil courts. Where a wrongful dismissal claim can be dealt with in either normal civil courts or a tribunal. A final difference is that it is rare for you, the employer, to be able to recover costs from a tribunal, but the civil court system does allow an employer to recover legal costs in a wrongful dismissal claim.
The element of compensation is also different. Wrongful dismissal claims measure the level of damages based upon an employee’s loss – for instance what payments or benefits they would have received if proper notice had been given, as per their contract.
In contrast, unfair dismissal claims have a set mathematical formula for the basic award and a compensatory element. It is important to note that a dismissal can be deemed to be both wrongful and unfair at the same time. Although any compensation paid by the employer for wrongful dismissal will normally be set off against the compensatory award part of an unfair dismissal award.
A final key difference in a wrongful dismissal claim is that you can rely on facts which came to your knowledge after the employee has been dismissed, but unfair dismissal cases are based on what you knew at the time the employee was dismissed.
Another difference is that wrongful dismissal looks at the facts of what actually happened. So what will be looked at are the facts supporting there was a fundamental breach of contract to justify instant dismissal.
Carry on reading for more information on wrongful dismissal cases. Find out where claims arise from, and what damages employees can claim for.
Sign up to our newsletter to get the latest from Business Advice.