#9713 - Wrongful Dismissal Model Answer - Employment Law

General

• Aim – Put the employee in the position had the employee been dismissed in accordance with the terms of the contract (Boyo v Lambeth London Council)

• Remoteness (Hadley v Baxendale) – Losses that arise naturally from the breach that should reasonably have been in the contemplation of the parties at the time of contract

Particular heads of damage:

Salary

• Net salary for the proper notice period or remainder of the fixed term

• Where there is a break clause in a fixed term contract, it is the net salary which would have been earned during the period of notice due under the break clause

• Consider the effect of PILON

• You may be given the salary figure in gross, ensure you explain that it is awarded net

Holiday

• The employee is entitled to payment in lieu of any holiday to which he was entitled, under his contract of employment or regulation 14 of the Working Time Regulations 1998 (28 days for a 5-day per week employee), but has not yet taken

• In a fixed term contract, since contractual damages assume that the employee has been dismissed in accordance with the terms of the contract (i.e. the entire fixed term has passed), the employee will be entitled to the holiday for the remainder of the fixed term

Bonus

• The general rule is that the employee is only awarded damages for loss of benefits to which he was contractually entitled and not ‘discretionary’ (discretionary can relate to a decision to pay the bonus, how to calculate it, the amount etc. – Small and Others v Boots Co Plc) payments such as Christmas bonuses or annually salary increases (Lavarack v Woods of Colchester). However in (Clark v BET and Another), the court said that contractual provisions relating to salary increases and ‘discretionary’ bonus scheme entitlement under contract must be interpreted realistically and not on the basis that any discretion would have been exercised to give the employee the least possible benefit. Therefore, a realistic figure based on previous figures, the company’s current performance and similar bonuses given to other members of the workforce should be used

Fringe benefits

• The employee may claim damages for loss of fringe benefits; particular examples:

  • Car – Consider whether the car was solely for business use or for personal use as well. Where the car is for business use and that business has now ended (the employment contract has ended), there is no loss by not having a car. However, if it was for personal use as well, a loss may have occurred

  • Pension – An employee can claim for loss of pension rights. Some pension schemes, especially those giving the employee a percentage of their final salary, can be very valuable as the employee is guaranteed a sizable sum of money. Therefore, even if the employee mitigates and finds a similar new job, it is unlikely that new job will come with a similar pension scheme. Therefore a loss has occurred.

Psychiatric injury

• A claimant cannot recover contractual damages for psychiatric illness arising from a dismissal (Johnson v Unisys Ltd). However the claimant may be able to recover damages at common law for psychiatric injury if he can establish that the illness arose from a breach of the contract during the existence of the employment relationship (Gogay v Hertfordshire County Council) e.g. a breach of the implied duty of mutual trust and confidence.

• Therefore the time of the breach is key

• An employee is bound by a restraint of clause unless there has been a repudiatory breach of contract by the employer – in a situation of wrongful dismissal there will have been a repudiatory breach as the employer has dismissed the employee in contravention of the...