Wrongful dismissal

Definition

Wrongful dismissal is when an employer terminates the contract of employment by dismissing the employee without notice. The employer is then in breach of contract and the employee may claim damages for that breach. It should not be confused with unfair dismissal. Although it is possible for an employer to claim damages from an employee for breach of contract (failing to give the required notice) in practice it is very difficult and more than likely to fail.

How a claim is made

There are two avenues open to employees seeking compensation for breach of contract that as a result they suffered financial loss. All claims can be dealt with by a County Court, however, if the claim is for less than £25,000 an employment tribunal is an option and for over this amount the high court is available.

In a County or High Court if there is no real defence for the action then the employee can request a summary judgment against the employer they can also ask for interim payments after liability has been accepted. The loser may have to pay costs. A claim may be brought up to six years after the alleged breach took place.

In an employment tribunal hearing it is unlikely that costs will be awarded, it is generally quicker and less formal. A claim may be brought up to three months after the alleged breach took place.

Both courts have procedures to deal with any counter claims, such as the employee owes money and is therefore in breach themselves. This is much easier to pursue through the County or High Court but have in mind the extra cost should it fail.

Employer's breach of contract

Any dismissal with notice that fails to comply with either statutory or contractual notice periods is a breach of contract and is therefore a wrongful dismissal. Where the contract of employment does not state the notice period a tribunal can impose what it thinks to be a reasonable notice period, this may be more than the statutory period of notice.

If an employee is deemed to be guilty of gross misconduct, negligence or incompetence the employer can terminate the contact without notice, this is a summary dismissal. The employee can claim wrongful dismissal by challenging the reasons for the dismissal; the employer must be able to show that the employee has acted in repudiatory or fundamental breach of contract upon which the employer is entitled to respond by imposing summary dismissal. One of the areas a tribunal will want look at is the degree of consistency in the treatment of similar cases in the past and the procedure by which the decision of summary dismissal was arrived at.

If an employee should be in breach of contract by not giving the correct notice there is very little an employer can do, as in most employment law it is bias towards the employee. Once a breach has been proven it becomes almost impossible to enforce any of the other terms or conditions in the contract including restrictive covenants.

Pay in lieu of notice

The whole purpose of a wrongful dismissal claim is for the employee to be compensated for the money and benefits that they have lost due to a lack of proper notice being given. Any pay in lieu of notice, so long as it correctly reflects what the employee would have expected to have received throughout the period of required notice, prevents a claim for wrongful dismissal as the payment is the same as the damages that would be awarded as the result of a successful claim. Neither the employee nor the employer can insist that the period be worked, but worked or not the payment for the notice period is a right.

Damages and settlement

Damages awarded will take into account all the income and benefits that the employee would have enjoyed had the correct notice period been served. This would include wages or salary, commissions, bonuses, tips, holiday pay, monetary value of benefits such as a company car, accommodation, pension contributions etc. The employee must also try to mitigate their loss by trying to find suitable alternative employment, it is up to the employer to prove that the employee has failed to do this.

Providing it is acceptable to both parties a settlement can be agreed before the hearing takes place. If the action was to be heard in either the county or high court an amount must also be paid to the employee in return for the case being dropped.