To establish whether the aspects of wrongful and unfair dismissal merit reform we must first identify how the two notions have affected the law till today, and how effective the remedies are of each concept. Unfair dismissal is a completely distinctive concept first established by the Industrial Relations Act 1971 which has been modified by Section 94 of the Employment Rights Act 1996 (ERA 1996) which now provides that an employee has the right not to be unfairly dismissed by his employer.
It is important to differentiate unfair dismissal from the common law remedy for wrongful dismissal. The latter is a civil law remedy essentially in regards to the breach of the contract of employment. From the employee’s point of view, there are significant deficiencies in this civil law relief as a remedy. This is due to the fact that the employer is generally entitled to dismiss an employee, under the terms of the contract so long as sufficient notice has been provided as stipulated in the contract of employment. Damages will then be limited to the loss of earnings during that period. This includes the monies in which the employee would have been entitled to had the contract been lawfully terminated, this would be, monies in lieu of notice.
The civil law fails to offer a remedy in the form of reinstatement. There is no effective remedy based upon breach of contract for failure to follow correct grievance and disciplinary procedures preceding dismissal. However, the development of unfair dismissal and the range of remedies offered in respect of it have perhaps empowered the employee to such an extent that he may ultimately be less well served, which will be further analysed.
There are many disadvantages to the employee in pursuing a civil claim for wrongful dismissal in contrast to an application to the tribunal for a claim for unfair dismissal. This is because the principal remedy for wrongful dismissal will be an action for damages determined by the loss caused due to the breach by the employer of the contract of employment. Therefore a dismissal with insufficient notice or no notice at all will result in a wrongful dismissal unless the employer was responding to a serious breach of the contract by the employee such as gross misconduct. What constitutes as proper notice will be determined by the terms of the contract. Justification for dismissal without notice depends upon the employer having a sound contractual reason for doing so.
The frequently cited opposition to wrongful dismissal as a remedy is the limitation of the compensation which would consequently be recoverable to the statutory notice period. However, the basic figure of wages that would have been earned throughout the notice period will be added the value of other remuneration. In addition, interest would be awarded on the damages from the date of dismissal to the date of hearing. Further, regard will be had to other significant contractual terms. Thus, the contract is competent of providing procedures which would have to be followed in the event that dismissal was contemplated.
In Dietman v Brent London Borough Council, it was held that although there was obvious misconduct, an employer will only have to adhere to the terms stipulated in the contract, if the terms specifically state what must happen before a dismissal can arise. It is suggested that such an approach may be an efficient answer to the criticism that the common law cannot assist an employee in terms of procedural protection in the same way as the statutory procedures do.
If there is a failure to comply with such procedures, then the courts can compensate for damages beyond the notice period, taking into consideration the length of time that would have been added to the employee’s service had the proper contractual disciplinary procedures been adhered to.
In the majority of cases, the employer can fulfil their duty under the terms of the contract by paying money in lieu of notice, and not expecting or allowing the employee to work their notice period. This was demonstrated in the case of Addis v Gramophone Co Ltd where Mr. Addis’s contract stated that his pay would be partly commission based and partly salary based and if dismissal occurred we would be given six months notice.
The House of Lords (HL) held that he was eligible for the wages of his six month notice period and the commission that he would have earned if he was working for those six months. According to Lord Loreburn L.C. damages could not be rewarded on the basis that the employee’s reputation was damaged which resulted in the employee finding it very difficult to obtain employment. The HL also held that Mr. Addis was not entitled to damages as compensation for injured feelings.
This suggests that compensation for wrongful dismissal depends upon monies which the employee would have been entitled to under the contract of employment had they not been dismissed and no other form of discretionary bonus. This is an area which has been subject to reform and has been illustrated in the case of Malik.
In Malik and Mahmud v Bank of Credit and Commerce International (in compulsory liquidation) the HL recognised damages based upon loss of reputation. However, it should be noted that the damages in this case were based upon the breach of an implied term of mutual trust and confidence (particularly, not to run a corrupt and dishonest business so as to damage an employee’s future employment prospects) and it has yet to be seen whether the principle might be given wider application so as to operate in situations in which those prospects are damaged by a capricious and unjustified dismissal. The HL stated that during the Addis case this contract term had not been established and today it is essential in every contract. This suggests that, case law has been reformed, and damages are now assessed on the basis of the breach in regards to the contract principles.
The HL held that the facts of the Malik case can be useful in future cases although the extension to Addis is restricted to the facts of the Malik case. However, in the Johnson v Unisys case the HL was not willing to extend the remedies available in the common law as statue provided a remedy in terms of compensation under unfair dismissal. This was agreed upon by Lord Hoffman, who stated that unfair dismissal is the proper method for claming compensation in matters relating to the manner of dismissal.
Another factor which should be taken into consideration when dealing with the aspects of wrongful dismissal is whether or not the terms of the contract exist once a repudiatory breach has occurred. Therefore, it is questioned as to whether the breach ends the contract (unilateral theory) or whether it is essential for the employee to accept the breach in order to make it effective and terminate the contractual relationship (bilateral theory).
Based on the law of contract the breach will only become effective on the contract once the innocent party accepts the dismissal. The majority of case law in relation to this issue involves the employee trying to restrain the employer from terminating the contract until a disciplinary procedure has taken place, therefore the courts have inclined towards the bilateral theory to ensure that the correct procedures are followed by both parties and that the contract is kept alive (Gunton v Richmond upon Thames).
When an employee lawfully ends the contract there is no question of liability for wrongful dismissal. Nevertheless, an employee’s rights to claim for unfair dismissal will be unaffected.
If a breach occurs without resulting in dismissal, the employee can accept the breach and claim wrongful constructive dismissal. If the employee does not wish to do this they can sue on the contract as it stands (Dietman v London Borough of Brent). If damages do not constitute as a sufficient remedy then the employee can put forward a claim for an injunction or seek a declaration of their rights under their contract.
An injunction or declaration are equitable remedies and can only be awarded through the discretion of the courts. The two main circumstances in which the courts grant an injunction is when there is no loss of trust in the employee (Powell v London Borough of Brent) or when the employment was in breach of justice (Gunton v London Borough of Richmond). However, it must be demonstrated that damages would not be a sufficient remedy (Wadcock v London Borough of Brent). When seeking an injunction, all internal remedies must have been pursued if available (R v BBC, ex p Lavelle).
It is difficult but not impossible, to bring a claim for unfair dismissal as well as an action for wrongful dismissal. The court or tribunal can stay one action whilst the other is pending (Carter v Credit Change Ltd). If one claim does not resolve the issue then the second claim is resorted to.
When analysing the aspects of reform it is essential that an employee has been employed for at least a year before making claim for either wrongful or unfair dismissal unless they can prove management has treated them unfairly or they are being unduly targeted by an employer and are not being dismissed for a valid reason. virgin net limited v harper
Another aspect of wrongful and unfair dismissal claims is the fact that employees who are on short term contracts or those who have not been employed for over a year do not have the same rights as those employees who have been employed for 1 year. Employees who have been employed for 2 years plus have full assistance form statute based law. This is unfair for employees who have worked for an extensive period of time, which limits their rights and is an area which merits reform as has caused a lot of controversy in recent case law.