HR · 4 August 2016

What is wrongful dismissal?

Where do claims arise from?

To give you an idea, let us say you dismissed an employee due to a breach of contract. A good example would be if an investigation and evidence considered within a disciplinary hearing supported they had committed an act of gross misconduct – going to the heart of an employment contract.

In other words, an employee has done something so serious that the contract is in effect repudiated, permitting you, the employer, to terminate it.

Gross misconduct enables dismissal without notice (known as summary dismissal). Summary dismissals are justified if the employee has committed a serious breach of their contract, examples of which must be clearly stated and defined in contract and disciplinary procedures.

Although often a non-exhaustive list, it will provide examples so an employee is aware when their employer will dismiss without notice. The breaches which justify summary dismissal will usually go to the heart of employment contracts even if the misconduct happened some time ago, and the employer discovers it subsequently. For example, a breach in the implied trust and confidence which should exist between employer and employee.

Being found guilty of gross misconduct does not automatically give the right to summarily dismiss. You the employer must still consider the context, supporting evidence and severity of the breach before ending the contract and summarily dismissing.

In a wrongful dismissal claim, the employee would not be deemed entitled to pay in lieu of notice if it could be proved that they, the employee, fundamentally broke their employment contract with you. But a summary dismissal must involve gross negligence or a deliberate breach of contract and be at a level serious enough to justify summary dismissal.

What can be claimed?

Damages in wrongful dismissal claims are calculated in the same way as breach of any other contract. The basic rule is that the employee must be placed in the same position as if the contract had been performed.

In other words, their full net salary for contractual notice and compensation for any loss of other benefits, rights during the notice period (for instance pension, company car, healthcare, bonuses, holiday.

There are, however, some rare examples in case law that have allowed an employee to claim compensation beyond the above.  One such case was that of Edwards v Chesterfield Royal Hospital NHS Foundation Trust, in 2010.

In this case, a consultant surgeon claimed damages of over £4.3 million following his dismissal for breach of contract for gross professional and personal misconduct by the NHS. His claim included loss of his future career elsewhere in the NHS. In this case, the Court of Appeal held that limiting to just the notice period does not apply where the claim is for breach of an express term of the employment contract.

The breach of contract was the defective conduct of the disciplinary hearing which broke the terms of NHS contractual procedure. So care must be taken to follow the terms of such a procedure before dismissing employees.

I always recommend, in contracts and the supporting handbook I write, that such procedures are not contractual for this very reason.

It is important to note that any wrongful dismissal award will usually be reduced if your employee gets another job during what would have been their notice period. This is because in contract an employee has a duty to mitigate their loss.

In practical terms this means doing everything possible to find another job at a similar level of remuneration. This principle of mitigation means that an employee who has been wrongfully dismissed will have a deduction from any damages if they fail to mitigate a loss by applying for another job or get another job with the same or a better remuneration package. (in which case there is no loss).

The employee loses out on compensation in both cases. If the employee can prove they have tried but failed to find alternative employment they will recover full wrongful dismissal compensation.  This means, you the employer would need evidence that your employee failed in their duty to mitigate their loss. So if ever you have a wrongful dismissal claim lodged against you I would recommend that you start collecting evidence to support your case.

Employers should always seek professional advice at the time, in response to particular circumstances.

Carole Thomson is founder and senior consultant at HR Support for Business. She can be reached for direct support at carole@hrsfb.co.uk

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ABOUT THE EXPERT

Carole is as a freelance senior HR consultant with over 18 years experience in supporting small businesses. She founded HR Support for Business to provide an affordable, but still professional, outsourced HR Support service for micro and small businesses looking for guidance.

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