Damages for Wrongful Dismissal

The Court of Appeal has ruled that an employee who suffered a loss as a result of findings of personal and professional misconduct made against him in disciplinary proceedings that were conducted in breach of his employment contract, which would not otherwise have been made, can seek to recover damages arising from the breach (Edwards v Chesterfield Royal Hospital NHS Foundation Trust).

Mr Michael Edwards, a consultant surgeon, was dismissed for gross professional and personal misconduct following a disciplinary hearing regarding allegations made against him by a patient. His contract of employment stated that it could be terminated by either side by giving three months’ notice and contained a clause to the effect that matters of professional misconduct or incompetence would be dealt with under a procedure negotiated and agreed by the Local Negotiation Committee.

Mr Edwards claimed that his employer had not followed the correct disciplinary procedures and brought a claim for losses arising from a breach of contract.

The County Court awarded him damages for wrongful dismissal in the sum of three months’ salary, to cover his notice period. Mr Edwards appealed to the High Court, claiming more than £4 million for loss of past and future earnings because he claimed his employer’s actions had ruined his career. He contended that the General Medical Council had investigated and dismissed the allegations made against him and had his employer followed the correct disciplinary procedure as laid down in his contract of employment, it too would have exonerated him. The NHS Trust argued that the law precludes the recovery of substantial damages for breach of a disciplinary procedure of this kind.

The High Court dismissed most of Mr Edwards’ claim. It held that whilst an employer’s failure to follow the correct disciplinary procedure is likely to render a dismissal unfair and entitle the employee to an award of compensation by the Employment Tribunal, under common law, damages for wrongful dismissal cannot normally exceed the sum payable to the employee in the event that his contract had been lawfully terminated – i.e. had he been given notice according to the terms of his contract. At common law, an employer is entitled to dismiss an employee on contractual notice for any reason. Mr Edwards was therefore awarded three months’ salary plus what he would have earned during the time it would have taken to complete the correct disciplinary process.

Mr Edwards appealed against this decision. The Court of Appeal considered whether or not, taking into account relevant case law, his entitlement to damages would be limited as the Trust contended in the event that his allegations were established.

The Court held that whilst under common law the implied term of trust and confidence in the employment contract does not apply to the manner of dismissal, thereby precluding a claim for damages where the employer acts unfairly towards an employee in relation to his dismissal, the law does not preclude an action for unlimited damages for breach of an express contractual obligation such as the agreed disciplinary procedure in this case.

The appeal was therefore allowed and Mr Edwards is entitled to pursue normal contractual remedies for the breach, without limitations.

Employers should ensure that they abide by the terms of employees’ contracts of employment and take care when drawing up contracts and staff handbooks to avoid giving contractual status to disciplinary procedures or other policies where this is not the intention.

© , October 2010

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Emmanuelle Ries - Partner

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