Wrongful dismissal should not be confused with unfair dismissal. The two claims are very different. Wrongful dismissal is based on contract law as well as statute law but relates specifically to breaches of the employment contract by the employer. The most common situation where this occurs is where the employer fails to comply with express or implied minimum notice periods. This can occur where the period of notice given falls short of the contractual agreement or no notice at all is given. This is an important consideration for employers tempted to dismiss in contravention of a notice provision because not only can they be held liable for damages for wrongful dismissal, but this may also render unenforceable any restrictive covenants they have against the employee.
Where an employment contract makes no mention of notice the relevant period should be ‘reasonable’. The Employment Appeal Tribunal considers what is regarded to be ‘reasonable’ notice based on the individual circumstances of the case.
Employers can however summarily dismiss (dismiss without notice) an employee in certain circumstances without this being wrongful. These situations arise where the employer is justified in their action because they can prove that the employee was in serious breach of their contract of employment. An example of this is where they have committed or are suspected to have committed theft, fraud or breach of trust, in which case summary dismissal is legitimate. Similarly, an employee is also entitled to resign without notice if the employer commits a serious breach of the contract of employment.
Another example of wrongful dismissal is where an employer fails to follow a contractual disciplinary procedure before dismissing the employee. If an employee pursues their wrongful dismissal claim in the Employment Tribunal, failure to follow the ACAS Code of Practice for Disciplinary and Grievance procedure (even where there is no contractual disciplinary procedure) can also result in a 25 per cent increase in awarded damages.
Claims for wrongful dismissal can be brought in both courts and Employment Tribunals.
Statutory Notice of Dismissal
The law provides for minimum periods of notice for dismissal of employees so that they are not treated unfairly by employers. Equally, employers have similar rights to reasonable notice and also have the right to sue for damages where the employee resigns in contravention with the stipulated terms of notice in their contract.
The statutory minimum periods of notice contained in section 86 of the Employment Rights Act 1996 are based on the period of time in that employment. The notice required for a period of employment of one month or more up to but not more than two years is a period of one week. Every year subsequently that the employee has worked after the first two years entitles them to an extra week’s notice. If the employee has worked continuously for a period of more than twelve years then the period of minimum notice is capped at twelve weeks.
The court or Employment Tribunal may in some circumstances find that the ‘reasonable’ period of notice in the particular circumstances is in fact more than the statutory minimum. However, in practice this discretion is rarely used.
Employers breach under Wrongful Dismissal
Employers can be in breach of the contract of employment in various ways, including:
• Falsely accusing the employee of misconduct;
• Non-payment of wage/salary;
• Changing the terms of employment;
• Harassing the employee; and
• Changing the workplace of the employee.
Anything that breaches the ‘mutual trust and confidence’ between the employee and the employer which is necessary to make the relationship workable is a breach. Where an employer is in breach the employee has the choice of either accepting the breach or resigning, but where the employee is forced to resign as a result of the breach then the employer may become liable for constructive dismissal.
Employers should also be aware that if there is a breach of the employee’s contract and the employee continues in their employment, the employer can still be held liable for compensation for their breach of the employee’s contract.
Damages for Wrongful Dismissal
In order for an award to be made against the employer, the ex-employee must prove that they were dismissed in breach of contract (or that they were not given the legal minimum notice period) and that as a result they suffered a loss. If an employer is liable for wrongful dismissal an award for damages will be made. The damages are awarded to compensate the employee to the position they would have been in had the contract been properly carried out. The award can also include any unpaid wage/salary, holiday pay, bonus, perks and any loss to a pension.
Further, the employer can be held liable for interest on the amount sued for from the point of dismissal up until the Employment Tribunal or court hearing.
The award for damages if pursued through the courts is unlimited, and unlike unfair dismissal, there is no qualification period of employment.