#16799 - Wrongful Dismissal - Labour Law

TERMNATION OF CONTRACT OF EMPLOYMENT

• Can identify 3 different termination types:

1. Bilateral terminations – mutual agreement terminations (Birch v University of Liverpool [1985])

2. Non-lateral terminations – by operation of law (eg frustration or the death of the employer).

3. Unilateral terminations – dismissal by the employer, or resignation.

• Focus on unilateral termination by the employer.

• Can identify 2 categories of dismissals:

• Legality of dismissal: Lawful and unlawful/wrongful dismissals

• Nature of dismissal: Outright/summary and constructive dismissals.

• Focus on the distinction between lawful/wrongful dismissals.

• Generally at common law, an employer is able to get rid of its employees on an indefinite contract without having to show good reason (McClory v Post Office-1992).

• However, CL will treat employer as having terminated the contract of employment unlawfully where it fails to provide the employee with reasonable notice of dismissal [nor a payment made to the employee in lieu of notice] (this will breach either an express or an implied term).

• Will afford employee a ‘wrongful dismissal’ claim for damages in respect of net wages/salary + other contractual benefits during notice period.

• If ‘reasonable notice’ given – lawful unilateral termination (Baxter v Nurse (1844)).

THE NOTICE RULE:

Common law: contract terminable by either side upon reasonable notice.

• CL rule is contingent on 3 factors: (i) custom of employee’s trade (ii) standing of individual’s job (iii) frequency of payment of wage/salary [ie 1 week’s notice where payment is weekly].

• This CL rule is restricted to contracts of employment of an indefinite period (Reda v Flag Ltd). NB most contracts are of an indefinite period.

The employer therefore has ‘unrestricted notice power’…and the employee is arguably placed in a precarious position.

• Jurisdiction (France) has a ‘just cause’ regime barring employer from dismissing, without cause.

• In USA, the ‘employment-at-will doctrine developed, providing for lawful termination on summary, rather than reasonable notice – very flexible approach to hiring and firing:

• Collins – contributes to comparable mobility of US labour market. UK preferred the approach of including an (often) implied term that must give reasonable notice.

• 3 possible justifications/motivations for UK CL harnessing ‘unrestricted notice rule’:

1. By affording generous power of dismissal, protected freedom of workers to strike w/o breaching contract.

2. Was thought preferable to retain some elements of the ‘master/servant’ law in the contract of employment. Enables employers to maintain discipline in the workplace. Employee is focused because they know they can be fired at any moment.

3. Judicial articulation of a specific philosophical approach channeled through the courts

• Freedland – Rarely ever questioned by the courts…courts treated unrestricted notice rule as an axiomatic feature of the legal contract of employment even if that orthodoxy was sometimes out of touch with social/economic reality.

1960s: Greater demands for greater protection from dismissal (Ridge v Baldwin)contributed to statutory unfair dismissal regime which was intended to confer a higher degree of security of tenure in favour of employees than that afforded by common law.

Statutory regulation:

• Section 86(1) ERA prescribes statutory minimum periods of notice with which the employer must comply. Takes effect as implied terms but employer must abide by an express term if included.

• In modern workplace, only on rare occasions will the contract lack an express term as to notice.

• S86(2)- employee who’s continuously employed for 1 month or more must be given not less than 1 week’s notice to terminate contract of employment.

• S86(3)- PILON (waiving right to notice in return for pay in lieu of notice).

• Court will never imply a lower notice period but may imply a higher one (Hill v Parsons).

• Newcastle Hospitals NHS Foundation Trust v Haywood 2018- in absence of express term, contractual notice of termination takes effect when it comes to employee’s attention and they read it or have had the opportunity to do so [not when notice was sent]

• Termination by the employer on notice is statutory dismissal. Such dismissal may or may not be fair depending on which it was carried out.

DISMISSAL AND BREACH OF CONTRACT OF EMPLOYMENT AT COMMON LAW:

1. THE EMPLOYER’S UNRESTRICTED POWER OF DISMISSAL BY REASONABLE NOTICE

• Employer not required to have any reason to dismiss an EE or even hear the EE prior to dismissal or give reasons for dismissal (McClory v Post Office 1992).

• Only have to give the highest of:

1. Reasonable notice

2. Notice period in written contract of employment or

3. Statutory min in s86 ERA

• If none of these are given, wrongful dismissal claim in damages.

In Johnson v Unisys, Reda v Flag and Eastwood v Magnox Electric- HOL+ PC ruled that the unrestricted reasonable notice rule cannot be constrained by the implied term of mutual trust+ confidence.

• Reda v Flag Ltd (2002)- unrestricted reasonable notice rule is merely an implied default term so it can be displaced.

• E.g a contractual job security clause which limits the employer to dismiss for a good cause only will bbe a carve out from the implied term that a general hiring is indefinite and can be terminated lawfully by reasonable notice.

• E.g if contract says ‘can only be fired for gross misconduct or long-term health only [the only just causes] then firing for redundancy will be a breach of the contract so EE entitled to be compensated in respect of the consequences of losing his job.

• However, Lord Mance in Edwards v Chesterfield Royal Hospital (2011) endorsed Hoffman in Johnson stating that the incorporation of a contractual disciplinary procedure cannot have intended to qualify the employer’s common law power to dismiss without cause on giving such due contractual notice’.

• Essentially, v clear+ unequivocal language required to satisfy a court that an express term is designed to dislodge the unrestricted reasonable notice rule.

2. EMPLOYER’S POWER OF SUMMARY DISMISSAL WITHOUT NOTICE

• ER doesn’t need to give either CL or stat notice when EE commits a repudiatory breach of contract (s86(6) ERA) and the dismissal is called justifiable summary dismissal.

• Where EE commits a repudiatory breach of an express or implied term of contract, this entitles the ‘innocent party’ (employer) to summarily terminate the contract by unilaterally accepting breach.

What counts as a repudiatory breach?

• Repudiatory breach must:

• ‘Make performance of the contract of service impossible’ (Wilson v Racher) or

• Where employee undermines mutual trust+ confidence such that it’s lost, that’ll be sufficient (Neary v Dean of Westminster).

• The legal basis for the claim is bilateral theory- employee repudiates, employer accepts+ terminates (Société Générale, London Branch v Geys).

• The general test of whether the employee’s breach of contract is repudiatory i.e. sufficiently serious to justify summary dismissal, is:

• Laws v. London Chronicle (Indicator Newspapers Ltd) [1959] “

May be single act, may be the ‘last straw’ following a series of small breaches (Pepper v. Webb [1969]).