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#13957 - Wrongful Dismissal - Employment Law

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Definition: Wrongful dismissal (breach of contract)

Common law contractual claim for breach of contract, which may be brought by workers or employees, based solely on the fact that the dismissal by the employer was in breach of contract.

Wrongful Dismissal is dismissal of employee in breach of contract.

  • How should contract have been terminated?

  • How was the contract terminated?

Covers actual dismissals by employer and constructive dismissals.

The remedy is therefore damages for breach of contract.

(a) termination of the contract with no notice or short notice; or

(b) where the employee/worker establishes he has been constructively dismissed; or

(c) termination of the contract before the expiry of a limited term where there is no break clause

Debt Claim for Sum Due for failure to make payment

  • Where a contract expressly allows the employer to terminate the contract either by notice or by making a payment in lieu of notice, the dismissal does not become wrongful even if the employer fails to make the payment.

  • The employee’s claim in this situation is for a sum due under the contract (a debt owed), not for damages for breach of contract (Abrahams v Performing Rights Society Ltd [1995] IRLR 486, CA).

  • Because the sum is for the recovery of a debt, the employee is not under a duty to mitigate losses.

Summary

a) was there a dismissal?

  • Actual Dismissal, aka summary dismissal (with or without notice)

  • Constructive Dismissal, employer has breached the contract terms (either express or implied, and not a minor breach); claimant exercises right to resign in response (with or without notice, within a reasonable time frame)

b) was the dismissal wrongful?

  • Before end of a fixed term, unless due to break clause or claimant's breach (not minor)

  • With insufficient or no notice, unless justified by claimant's breach (not minor)

    • notice period must be above statutory minimum

    • is there a PILON clause in the contract? If so, employer can replace notice with payment – in this case there is still a breach but payment will be deducted from any damages, so depending on amount may make a claim redundant

  • In case of Constructive Dismissal, employer's breach renders the dismissal wrongful

Time Limits

- must claim in an employment tribunal within 3 months of dismissal

- must claim in a civil court within 6 years of dismissals

c) compensation – damages for breach of contract

  • normal contractual damages for notice period or until end of fixed term (unless break clause): loss of net wages, plus any commissions, pension, health insurance, car, bonus, holiday pay, etc.

  • reduced if: payments made (in lieu), benefits, duty to mitigate, accelerated receipt

  • max award at employment tribunal - 25'000; no max award at civil court

  • if claim for wrongful dismissal and unfair dismissal, any overlapping compensation (e.g. immediate loss of earnings) will be set off when arising from same dismissal

STATE THE CLAIM – Wrongful Dismissal

Definition: Wrongful dismissal (breach of contract)

Common law contractual claim for breach of contract, which may be brought by workers or employees, based solely on the fact that the dismissal by the employer was in breach of contract.

  • No continuous employment restriction – could be on day one of your contract

[EMPLOYEE] must make a claim for WD within 3 months of dismissal to a tribunal or within 6 years of dismissal in civil court.

ACTUAL DISMISSAL
WITH NOTICE

  • On a fixed term (limited term) contract, in the absence of a ‘break clause’ a party will be in breach of contract or if notice shorter than expressly agreed.

  • Indefinite term contract may be terminated by either party giving the other proper notice.

    • There is NO breach and NO claim for wrongful dismissal if ended by proper notice.
WITHOUT NOTICE

Repudiatory breach - An employee who leaves in such circumstances is said to be constructively dismissed. In order for an employee to treat himself as constructively dismissed within this provision, the employer’s conduct must either amount to a significant breach going to the heart of the contract, or show that the employer no longer intends to be bound by one or more of the essential terms of the contract. The employee is then entitled to treat the contract as discharged at common law (Western Excavating Ltd v Sharp [1978] QB 761, CA).

Repudiatory Breach and Summary Dismissal:

  • Serious breach

  • employer can terminate the contractual relationship without notice or before the end of the fixed term contract.

NO BREACH

On the facts, [EMPLOYEE] was [DISMISSAL] therefore he has been actually dismissed without notice.

BREACH

‘If the employee commits a serious breach (repudiatory breach) of contract, the employer can treat the contract as discharged.

On the facts, actual dismissal without notice may be justified as [EMPLOYEE] [CHOOSE FROM LIST] if [EMPLOYER] had genuine belief in [EMPLOYEES] guilt based on reasonable grounds. [EMPLOYER] could constitute this as a breach so serious that it entitles [EMPLOYER] to summary dismissal of the contract without notice. However, if there are no reasonable grounds then this will amount to actual dismissal without notice.

Repudiatory breach

Even if:

  • Related to conduct outside of work as long as it undermines the contractual relationship.

  • Justified by discovery of sufficient grounds after dismissal has taken place

Summary dismissal justified:

  1. Disclosure or revealing of trade secrets

  2. Willful disobedience or refusal to obey lawful orders

  3. Taking bribes and secret commissions

  4. Guilty of dishonesty

  5. Can be conduct outside of work if it undermines the contractual relationship between employer and employee

  6. Theft from employer
OR
CONSTRUCTIVE DISMISSAL

Normally an employee who resigns will have NO claim for wrongful dismissal

an employee is treated as dismissed if ‘the employee terminates the contract under which he is employed (with or without notice) in circumstances in which he is entitled to terminate it without notice by reason of the employer’s conduct’ (ERA 1996, ss 95(1)(c) and 136(1)(c)).

Employee resigns because of employer’s repudiatory breach of contract.

  1. Breach of express or implied terms

On the facts, [EMPLOYER] has…

(check any clauses for guidance on whether it could be argued that the reason is ok)

  • Unilateral Reduction in salary (express term of contract)

  • Change in job description (helpline worker now not a trainer, differences in the jobs i.e. no more face-to-face customer contact)

  • Change of contractual hours (does contract permit this) (Temp change not perm) (unsocial hours – 7pm finish)

  • Removal of a bonus

  • Threat of change to terms and conditions and dismiss if not accepted (Greenaway Harrison Ltd v Wiles 1994)

  • Transferring power to another on a permanent basis when employee is away is a breach of the implied term of trust and confidence

  • Not receiving a pay rise when all his colleagues have – breach of the implied duty of trust and confidence

  • Breach of implied duty of trust and confidence without ‘reasonable and proper cause’

    • Unjustified accusations of theft

    • Allegations employee unable to do job

    • Failure to make reasonable adjustments

    • Frequent use of foul and abusive language (Horkulak v Cantor Fitzgerald International 2003)

      1. Employee has resigned as a result of the employer’s conduct AND resigned within a reasonable time otherwise taken as having affirmed the contract AND waived the breach

This is a repudiatory (not minor) breach of [express or implied] terms of the contract which will entitle [EMPLOYEE] to resign (without or without notice) and discharge the contract for constructive dismissal (Western Excavating).

[EMPLOYEE] has a good chance despite it being difficult to prove. [EMPLOYEE] [DID/MUST] resign within a reasonable time of the breach [DATE EXAMPLE].

  • Minor breaches won’t justify a resignation unless ‘last straw’, which is the last of many minor breaches, resignation may be justified as employers conduct is looked at as a whole (Abbey National v Robinson)
OTHER

Termination of agreement

  • Where the parties at any time agree to terminate the contract, neither will be in breach of contract and no claim for WD will arise
FRUSTRATION

  • It terminates automatically by operation of law.

  • Neither party will be in breach and neither party will have a claim against the other, other than for wages due to the date of frustration.

  • Frustration occurs where, without the fault of either party, some event occurs which prevents performance of the contract. The event must not have been provided for by the contract.

The principal events which may frustrate a contract of employment are as follows:

  • Death of either party

  • Illness or injury of the employee

  • Imprisonment of the employee

There is an implied duty, as part of your employment contract, that your employer treats you, as their employee, with respect.

If your employer commits a serious breach of this duty you would be able to treat your contract of employment as at an end and resign. As long as you resign within a reasonable time after the breach by your employer, you would be able to bring a claim known as “Wrongful Dismissal” at an employment tribunal. In such circumstances your resignation would be called a “constructive dismissal” and you would be arguing that you had been “dismissed” in breach of contract, that is, that your dismissal was wrongful. If you failed to resign within a reasonable time of the breach, a tribunal would consider you...
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