What is wrongful dismissal?
Wrongful dismissal, wrongful termination or wrongful discharge are when a person’s contract of employment is terminated. This may happen in a manner which breaches one or more conditions of their employment contract or for reasons which constitute a breach of employment law.
There could be one violation of the contract or several separate violations that lead to either premature termination of employment, insufficient notice, or unwarranted reasoning.
Statutory Notice and Reasonable (Common Law) Notice
Within a standard contract of employment, it is expected that an allotted notice period will be specified. However, in lieu of an agreement within a contract, employment law has standardised statutory notice periods that employers should also adhere to.
In the UK, the current statutory notice period cannot be less than one week for every year of service, with a minimum of one week and a maximum of 12 weeks. Providing an employee with advance relevant notice of the termination of employment is a legal requirement.
The most common type of contract breach leading to a claim for wrongful dismissal is the discharging of an employee without the employer obeying either the minimum notice periods.
Examples of Wrongful Dismissal
Cases of wrongful dismissal or wrongful termination can include:
- An employer cannot legally dismiss an employee for reasons pertaining to age, race, nationality, gender, or sexual orientation.
- An employer cannot legally terminate a contract on the basis that an employee has refused to commit an unlawful act.
- An employer cannot legally terminate a contract of employment as a recourse to a complaint or because an employee has lodged a claim for discrimination.
- An employer cannot legally terminate a contract as retaliation for employee whistleblowing or reporting malpractice to relevant authorities.
Difference between Wrongful Dismissal and Unfair Dismissal
It would be best if you were careful to avoid confusing wrongful dismissal with unfair dismissal.
The key differences are as follows:
- A dismissal that breaches the terms of contact can constitute wrongful dismissal, whereas any violation of employment law statutes is termed as unfair dismissal.
- Wrongful dismissal is a violation of the contract, and unfair dismissal is a violation of a statute.
- Wrongful dismissal argues that the employment contract has been breached and unfair dismissal relates to whether the method of termination was fair.
- An unfair dismissal claim requires the employee to have been employed for a period of 2 years. However, there is no set time scale of employment for lodging a claim for wrongful dismissal.
What is needed to start a Wrongful Dismissal Claim?
In the first instance, an employee needs to prove that they were dismissed in a manner which breaches their contract of employment or with less than the statutory minimum period of notice being given.
The second facet needed is to demonstrate that they suffered a loss as a result of their employer’s actions. This can include emotional losses or financial deficits because of the dismissal.
Any claim for wrongful dismissal would need to be made to an Employment Tribunal within three months from the date of employment termination. There is no minimum or maximum length of service required to lodge a claim, as the complaint is about the contract of employment itself.
Points of Caution – Probationary Clauses
As there is no period of minimum employment for a claim to be brought for wrongful dismissal, one way to side-step claims for newer employees is to add a probationary period clause into the employment contract. This clause can legally permit an employer to terminate an agreement after a set period (usually at the end of probation), without recourse.
An Employee’s Right to Work
All employees are legally entitled to be paid throughout the course of their employment as well as receiving full payment during their notice period.
While an employee is entitled to continue working fully throughout the course of their dismissal notice period, it can often benefit the employee to utilise holiday time, garden leave or an alternative arrangement to suit the comfortability of those involved.
What are Payments In Lieu Of Notice (PILON)?
A reasonably common way for employers avoiding the potential for wrongful dismissal claims is to utilise PILON.
This effectively enables the employer to pay their employee in full for the notice period as a substitution for either providing the whole notice period or for the employee having to work the entire notice period.
This is often a favourable option if the employer wishes to minimise potential problems or risks of a disgruntled employee continuing to work their full notice.
If a PILON payment is offered and the employee accepts it, then this would not constitute a breach of contract. Therefore, it prejudices any potential for a wrongful dismissal claim to be brought.
Reinstatement of role
Should a wrongful dismissal case be upheld, there is the possibility that an employer could reinstate the job role of the wronged employee. However, a breakdown of employee/employer relationship and trust has usually already occurred by this point.
Compensation Limit for Wrongful Dismissal
Compensation payments are the most common outcome for recompensing an aggrieved employee for wrongful dismissal.
Currently, within the UK, compensation is capped at £25,000 for wrongful dismissal tribunal cases.
However, if the case goes to court, there are no capping limits and costs could, therefore, be significantly higher.
Furthermore, an employee can only be compensated for the net loss suffered because of unlawful dismissal. Recoverable damages can include other benefits that would have been earned or accumulated during the statutory or contractual notice period. It can consist of bonuses, pension allowances or health cover.
Compensation – essential points to note:
- The employer must pay wages (including any anticipated or expected pay rises) for the period of notice.
- Unused holidays cannot be claimed for in the event of wrongful dismissal – only claims for lost earnings, damage to reputation.
Additional Losses for Wrongful Dismissal
Compensation payments in cases where an employee has been successful in bringing a claim for wrongful dismissal can also include payments for subsequent breaches of contract. These can include:
- Loss of earnings
- Costs for psychiatric care or therapy needed because of the wrongful dismissal
- Loss of earnings for the time it would have taken to follow the correct termination or disciplinary procedures
- Loss of earnings for any unpaid sick leave due to absence caused by bullying or maltreatment
- Loss of earnings caused by unfair demotion
- Loss of earnings caused by associated damage to reputation
- Compensation payments for additional benefits can also be claimed for, and these can include:
- Loss of pension
- Loss of owed or accrued commission
- Loss of expected bonuses *
- Loss of owed or expected overtime
- Loss of accrued holiday or unpaid sick leave
- Loss of health insurance
*It is worth noting that as the employer is under a duty to act in good faith. It often makes sense to arrange a compromise in respect of overtimes or bonuses that an employee would have received had they carried on working.
Possible Deductions from Compensation
As a claim for wrongful dismissal is a contract claim, the employee is required to mitigate their losses. Hence, they should re-enter suitable employment as soon as possible. If found that the claimant has not acted in an appropriate manner and safeguarded their losses, then these costs can be deducted from the overall compensation award.
Examples of costs that can be deducted from compensation claims include:
- If the employee has failed to mitigate his losses
- Compensation already received as part of the same claim
- Social security payments already received or entitlements
Is there a case for Defence?
As with all cases, it is often anticipated that the employer can lodge a defence. The potential for this should be kept in mind when filing a claim for unfair dismissal. Examples of possible defences can include:
- If the employer can justify terminating the employment contract due to gross misconduct; however, failure to act appropriately in line with company disciplinary procedures can also be tantamount to wrongful dismissal.
- If the employer uncovers that the employee seriously breached their contract in a way that would have justified summary dismissal
- If the employer can demonstrate that the contract allowed dismissal without disciplinary procedure or devoid of notice.
If you believe you have a case for wrongful dismissal, you may want help to understand exactly where you stand. Losing your job is never easy, but a successful claim may help to ease any issues that arise afterwards.
If you think you have a case for wrongful dismissal and you want to make a claim, contact an employment solicitor now!
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