We are all aware of an employee’s right to be able to bring a claim for unfair dismissal in the Employment Tribunal (provided they meet the qualifying criteria). However, you may not be aware that in some circumstances an employee may also bring a claim in either the Employment Tribunal or the civil courts for breach of contract for events leading to their dismissal. We look at two recent Supreme Court decisions that deal with the scope of such breach of contract claims.
A breach of contract claim can involve a breach of either an implied term or of a written term in the employment contract. In 2001, a principle was established by the House of Lords in the case of Johnson v Unisys Ltd. The principle established was that an employee cannot bring a claim for breach of the implied term of trust and confidence for the manner in which they are dismissed. The reasoning was that to allow this would duplicate the statutory right to claim compensation for being unfairly dismissed under the Employment Rights Act 1996.
This has subsequently been referred to as the ‘Johnson exclusion area’. Claims that fall out of the Johnson exclusion area can occur where the events leading up to the dismissal are entirely independent of the dismissal itself, whether that dismissal is unfair or not. Examples of successful claims include psychiatric injury caused by events leading up to dismissal (Eastwood v Magnox Electric plc) and unfair suspensions (Gogay v Herfordshire County Council). However, such cases are rare exceptions and depend very much on their own facts.
Two recent cases were considered in the Supreme Court – Edwards v Chesterfield Royal Hospital NHS Foundation Trust and Botham v Ministry of Defence. The primary consideration in both cases was whether the claims fell in or out of the Johnson exclusion area.
Mr Edwards had been dismissed for gross professional and personal misconduct. Mr Edwards alleged that there were a number of procedural flaws as against his employer’s disciplinary procedure, such as the fact that the disciplinary panel did not have the correct persons present. He alleged that had such procedural flaws not been present, the panel would not have made incorrect findings and he would not have been dismissed and suffered damage to his reputation. Mr Edwards brought a claim for breach of contract.
Mr Botham was a youth community worker and was dismissed for gross misconduct following a finding that he behaved inappropriately in relation to two teenage girls. Mr Botham was placed on a register stating he was unsuitable to work with children. He brought a claim for breach of contract as a result of breaches in the contractual disciplinary procedure and claimed for loss of reputation and future loss of earnings.
Both cases were appealed to the Supreme Court by the NHS Trust and the Ministry of Defence respectively.
The Supreme Court by a majority held that both employees were claiming damages for what was part and parcel of the dismissal process and therefore both fell within the Johnson exclusion zone. The Supreme Court reiterated that to allow such claims would be contrary to the intention of Parliament that claims of unfair dismissal should be decided in the Employment Tribunals. It was said that Parliament had placed limitations on compensatory awards to balance the interests of both employees and employers in cases of unfair dismissal. Compensation for events leading up to dismissal is not included in compensatory awards, however there can be an uplift of up to 25% in certain Tribunal claims where an employer fails to follow the ACAS Code on disciplinary and grievance procedures.
Therefore, employers will be relieved to hear that successful claims for breach of contract in this area are likely to very rare. They will involve careful consideration by the Courts of events leading to the dismissal, whether the breach is sufficiently independent from the dismissal itself and whether any loss flows from that. The risk of these types of claims can be reduced (albeit not eliminated) by expressly providing that any disciplinary procedure is non-contractual.
If you would like to talk through a situation you are dealing with, or if you need advice on any aspect of employment law, please contact any member of the Pure Employment Law team (01243 836840 or [email protected])