What is wrongful dismissal?
Wrongful dismissal is a dismissal in breach of contract. It is not the same as unfair dismissal. In wrongful dismissal cases, fairness is not an issue; the issue is whether the terms of the contract have been breached.
Types of wrongful dismissal claim
The following types of breach of contract are common in claims for wrongful dismissal:
- Breach of a notice term.
- Termination of a fixed-term contract before its expiry.
- Breach of a contractual disciplinary or redundancy procedure.
The most common type of claim is for breach of the notice period.
Can an employer dismiss without notice?
Payment in lieu of notice
If your employment contract contains a non-discretionary payment in lieu of notice (PILON) clause (a clause stating that if your employer terminates the contract with insufficient notice then you will receive a PILON), any dismissal without adequate notice will not be wrongful, even if your employer does not actually make the PILON. In these circumstances, the contract has been lawfully terminated by your employer and you must bring a debt claim, rather than a wrongful dismissal claim.
However, it is more common for an employment contract to give the employer a discretion to make a PILON on termination of employment. If your employer has a discretion to make a PILON but does not exercise that discretion, dismissal without notice will be wrongful. Conversely, if there is a discretion to make a PILON, and that discretion is exercised, dismissal without notice will not be wrongful, and you instead become entitled to the PILON as a liquidated sum under the contract to be enforced by a debt claim. Once the PILON clause has been invoked, your employer is obliged to make the payment even if it transpires that you have been in repudiatory (serious) breach of contract that would have justified your summary dismissal (i.e. dismissal without notice).
What if the employee commits a repudiatory breach?
Dismissing you without notice may be justified if you have committed a repudiatory (serious) breach of contract.
The level of misconduct required for your behaviour to amount to a repudiatory breach is a question of fact for the court or tribunal.
What are the effects of wrongful dismissal?
Restrictive covenants
A wrongful dismissal will free you from any covenant in restraint of trade; e.g. those terms that seek to prevent you from working in competition with your employer for a specified period or within a particular location.
Confidentiality
It is usual for confidentiality obligations continue to survive after termination. However, following a wrongful dismissal, the law relating to an employee’s obligations of confidentiality are not entirely clear.
Where do you make a claim for wrongful dismissal?
A claim for wrongful dismissal may be brought in the civil courts or the employment tribunal. Employment tribunals have jurisdiction to hear claims which arise or are outstanding on the termination of the employee’s employment.
There are some advantages to bringing a wrongful dismissal claim in the civil courts as opposed to the employment tribunal:
- There is a difference in limitation periods: in the tribunal you have three months to bring a claim (plus any extension due to participation in Acas early conciliation). In the civil courts, you have six years.
- Claims in the tribunal for breach of contract are subject to a compensation ceiling of £25,000. However, there is no maximum limit in the High Court or county courts. In addition, a civil court may make a declaration or an injunction.
- If you are highly paid or have a long notice period you may gain more from a wrongful dismissal claim in the civil courts due to the maximum awards available in the employment tribunal.
One of the disadvantages of bringing a civil court claim is that they are usually expensive and if you lose, you may have to pay the winning party’s costs. In the tribunal you will not, generally, have to pay the other party’s costs, even if you lose.
Remedies
In the tribunal, the only remedy available for wrongful dismissal is damages. In the civil courts, damages and an injunction and/or a declaration can be obtained.
Damages
The purpose of damages is to put the employee in the position they would have been if the contract had not been breached. Therefore, damages will reflect the net value of salary and any other contractual benefits to which you would have been entitled had you have been allowed to work out your notice. It may also cover the period it would have taken for a contractual disciplinary or redundancy procedure to be complete.
As stated above, damages for wrongful dismissal in the employment tribunal are capped at a maximum of £25,000. No such cap applies in the civil court.
If a breach of contract claim is brought in an employment tribunal, compensation can be increased or decreased by up to 25% to reflect a party’s compliance with the Acas Code of Practice on disciplinary and grievance procedures. The civil courts cannot adjust compensation in this way.
Mitigation
Unless the claim is one of debt you are under a duty to mitigate your losses. This is a general duty to reduce your losses by taking reasonable steps to find another job. If you are successful then the salary and benefits obtained from that other job must be deducted from the damages payable by the ex-employer.
Declaration and injunction
Declaration and injunction are both equitable remedies and may only be granted at the discretion of the court. They will only be granted where damages would be an inadequate remedy. Generally, the courts will not force an employee to work for an employer, nor will they force an employer to take back an employee. This is because of the personal nature of the employment relationship. Consequently, injunctions are primarily used against an employee relating to the enforcement of restrictive covenants.
Declarations cannot require an employer to act in accordance with the contract. However, they can put pressure on an employer to do so. Declarations will declare that something is null and void or what the employee’s rights are.
Can we help you?
If you have an employment law issue, please contact one of our specialist employment law solicitors at LincsLaw on 01522 440512 or visit our website at www.lincslaw.co.uk for more details on how we can help you.
Kathryn Bolton
Specialist Employment Law Solicitor
LincsLaw Employment Solicitors