Reading: S. Deakin and G. Morris (2009) Labour Law – 5th Edition Oxford: Hart Publishing, chapter 6, pp. 351 – 403J
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2011 Katarzyna Gromek Broc, York Law School Reading:S. Deakin and G. Morris (2009) Labour Law – 5th Edition Oxford: Hart Publishing, chapter 6, pp. 351 – 403JJ. Fudge ‘The Spectre of Addis in Contracts of Employment in Canada and the UK’ (2007) 36 Industrial Law Journal 51J. Bowers and S. Honeyball (2010) Honeyball and Bowers’ Textbook on Labour Law – 11th Edition Oxford: OUP, chapter 4D. Brodie ‘The Beginning of the End for Addis v. The Gramophone Company?’ (2009) 38 Industrial Law Journal 228Introduction:The termination of the employment relationship might arise via a number of different routes, most of which can, in some way, be tied to the operation of the law of contract. The common law has always had some role in the regulation of the end of the employment relationship via the concept of wrongful dismissal, though, as we will come to see, this has only a limited regulatory role. Instead, all that the law seeks to do under wrongful dismissal is to ensure that all contractual obligations are discharged satisfactorily, and that where employers or employees have acted in a manner which could be argued to have repudiated the contract, that this is dealt with in an effective manner. The common law also operates to deal with termination of the employment relationship in a number of other ways – usual contractual principles operate, so the parties might agree to terminate the contract, or the contract might be frustrated or otherwise rendered void. The common law of wrongful dismissal, and general issues of termination of the employment contract, notice periods etc. have less significance than they might have had 30 years ago due to the significant increase in statutory regulation of the termination of the employment relationship. Statute has modified the operation of a number of common law doctrines by, for example, modifying minimum notice provisions, ameliorating the harshest effects of the frustration of contracts, and ensuring the availability of redress for employees in some circumstances where common law doctrines served to prevent legal action. By far the most significant of the legislative interventions in the regime for the termination of employment contracts is the regime on unfair dismissal. As we will see, until the mid-1970s, an action for wrongful dismissal with the limited remedies that this offers was all that was available for employees whose employment contracts were terminated. The introduction of the unfair dismissal regime has introduced a much broader mechanism of redress, and has curtailed employers’ freedom of manoeuvre in this area, although as we will see, the case law still permits employers to have considerable discretion in decisions over when to dismiss. It is important to note that the unfair dismissal regime provides for a number of remedies, including compensation for unfair dismissal and potential reinstatement or reengagement orders. The difficulty here is that the law tends to be wedded to contractual ideals, and compensation is the usual remedy. Although the government envisaged reasonably frequent use of the order for reinstatement or re-engagement when the unfair dismissal regime was created, the courts have been most unwilling to make such orders, often arguing that the mutual trust and confidence which is necessary for the employment relationship to subsist is broken. The unfair dismissal regime is a complex one, which is designed to serve a number of goals, including offering a general protection to employees who have their contracts of employment terminated, but also providing a function which aims to protect employees from certain actions of the employer which are deemed to be contrary to public policy. This split between two possible systems of redress – wrongful and unfair dismissal, has frequently caused difficulties. It is, of course, possible to pursue both lines of attack – some damages may be due for a wrongful dismissal, and then an unfair dismissal claim might bring some compensation. However, the general remedial approach of the common law is extremely limited. As we will see, the common law largely restricts damages for wrongful dismissal to wages/salary for the notice period. This leads to some significant problems for certain employees, but the courts have been strict to delineate the wrongful and unfair dismissal regimes. Some argue that it would be rather better if the law escaped from this present limited approach, and there is evidence of some other common law jurisdictions doing so. Termination of the Employment Relationship:It is important to note at this stage that not all terminations of the employment relationship can be treated as ‘dismissals’. If a termination is not a dismissal, then it will not be actionable at common law as a wrongful dismissal, or under the statutory unfair dismissal regime. As we will see, some of the law on whether a particular termination is a dismissal serves to disadvantage employees. If a termination can be considered to be a dismissal, then the common law will consider an action for wrongful dismissal, and there might also be an action for unfair dismissal, too. A – Methods of Termination which are NOT Dismissals: ‘Death and Dissolution’:
Frustration: Morgan v. Manser [1948] 1 KB 184. Poussard v. Spiers (1876) 1 QBD 410. Condor v. Barron Knights Ltd. [1966] 1 WLR 87. Marshall v. Harland and Wolff Ltd. [1972] 2 All ER 715. Notcutt v. Universal Equipment Co. (London) Ltd. [1986] ICR 414. Hare v. Murphy Bros. Ltd. [1974] 3 All ER 940. FC Shepherd v. Jerrom [1986] ICR 802. Expiry of a Fixed Term Contract: At common law, all fixed term contracts, whether for ‘task’ or ‘term’ will expire at some point, and this is deemed to be a termination via the operation of law, and not a dismissal. It is notable that there is now a great deal of statutory regulation of dismissal in fixed term contract cases, mainly because if there was not this statutory protection, employers would be able to use fixed term contracts to evade the provisions on dismissal altogether. BBC v. Ioannou [1975] 2 All ER 999. Dixon v. BBC [1979] ICR 281. ERA 1996, ss. 95(1)(b) and 136(1)(b). See the definition in ERA 1996, ss. 235(2A) and (2B). Mutual Consent to Termination: The challenge for the law here is to distinguish between actions which are genuinely mutual agreements to terminate the contract, and those circumstances where the employer exerts pressure or power to create what is ostensibly a mutually agreed termination, but which might constitute a constructive dismissal. SW Strange Ltd. v. Mann [1965] 1 All ER 1069. McAlwane v. Broughton Estates [1973] 2 All ER 299 – caution to be applied in some cases! Lipton Ltd. v. Marlborough [1979] IRLR 179. Scott v. Coalite Fuels and Chemicals Ltd. [1988] ICR 355. B – Dismissal by Notice: Contracts of employment should generally contain a notice period, which MUST meet statutory minima. If the contract or agreement between the parties is silent on the issue of notice, it will be for the courts to imply a period of notice that is reasonable. This has been a problematic issue for those who have high-paying executive contracts. ERA 1996, s. 1(4)(e). (i) - The Process of Quantification: Grundy v. Sun Printing and Publishing Association (1916) TLR 77. Fox-Bourne v. Vernon & Co. Ltd. (1894) 10 TLR 647. Hill v. CA Parsons & Co. Ltd. [1972] Ch. 305. ERA 1996, s. 86 – ‘1 week’ for 2 years of employment, and 1 week for each year thereafter, up to a maximum of 12 weeks. For employees, a minimum of 1 week after 4 weeks’ continuous employment. N.B. Contract is free to EXTEND these periods, but will not reduce them. (ii) – The Notice of Dismissal: In general, notice given should be clear and personal – i.e. communication to someone else other than the employee is not normally good enough. The other question is whether the employer’s conduct can be said to constitute a dismissal. Morris v. Bailey [1969] 2 Lloyd’s Rep. 215. Morton Sundour Fabrics v. Shaw [(1966) 2 ITR 84. Tanner v. DT Kean [1978] IRLR 110. Mitie (Security) London Ltd. v. Ibrahim (EAT) (not reported). Gisda Cyf v. Barratt [2009] EWCA Civ 648; [2009] I.C.R. 1408. (iii) – Wages in Lieu: There is some debate over whether employees are obliged to take ‘wages in lieu’ if offered (i.e. a payment of wages for the relevant notice period if they cease work immediately), though it is clear that the statutory regime does not prohibit the payment of wages in lieu entirely. Konski v. Peet [1915] Ch. 530 – link to law on contracts we looked at earlier in the course. Delaney v. Staples [1992] ICR 483 – Lord Browne-Wilkinson’s four part test. Abrahams v. Performing Right Society [1995] ICR 1028. C – Dismissal for Cause: It is quite clear that the employment relationship might be determined where there is good cause. If either the employee or acts in such a way as to repudiate the contract then the employer is able to act accordingly and consider the contract to be terminated. Problems arise in a number of circumstances – questions include the nature of the conduct necessary to indicate repudiation at common law, and the extent to which any contractual material on dismissal might impinge on the ability of employers to engage in a summary dismissal. Callo v. Brounker (1831) 4 C & P 518:
Laws v. London Chronicle [1959] 2 All ER 285 – question is simply one of normal contract. Sinclair v. Neighbour [1967] 2 QB 279. Clouston & Co. v. Corry [1906] AC 122. Pepper v. Webb [1969] 2 All ER 216. Neary v. Dean of Westminster [1999] IRLR 288. Denco Ltd. v. Joinson [1991] 1 ICR 172. Thomas v. Hillingdon LBC (2002), The Times, 4 October. D – The Concept of Wrongful Dismissal: Wrongful dismissal is the idea that the employee has been dismissed other than in accordance with the terms of the contract of employment. The most common circumstances in which a wrongful dismissal claim might arise are:
Remedies are, in the main, limited to the award of damages, usually limited to the amount of wages or salary that would be due if notice had been given, offering the employee a relatively limited right of compensation compared to the unfair dismissal regime. (i) – No Specific Performance or Injunctive Relief: De Francesco v. Barnum (1890) 45 Ch D 430. Howard v. Pickford Tool Co. Ltd. [1951] 1 KB 417 – automatic termination not in line with contract? Sanders v. Ernest A Neale Ltd. [1974] 3 All ER 327. N.B. the largely pointless debate between the ‘automatic’ and ‘elective’ theories of termination. London Transport Executive v. Clarke [1981] ICR 355. Brown v. Southall & Knight [1980] ICR 167. Robert Cort & Son Ltd. v. Charman [1981] ICR 816. (ii) – Exceptions to the ‘No Enforcement’ Rule: These are useful to know something about, but we will not dwell on them as they apply in only a limited number of cases and circumstances.
(iii) – Damages Available for Wrongful Dismissal: The usual picture here is that the only damages that are available are those which would constitute the wages or salary which would otherwise have been paid in the notice period. There are some slight caveats to this general principle, but these are relatively minimal. One is that the employer might be liable for the period which would have been taken had the contractual disciplinary procedure been abided by. The other possibility is that in certain limited circumstances, damages might be available for the manner of dismissal or for damage to reputation, though this is a very vexed area of law which has several contradictory authorities at the highest judicial level. It seems that the modern case law has endeavoured, insofar as possible, to place great fetters on the availability of additional damages through the wrongful dismissal route. Gunton v. Richmond-upon-Thames District Council [1980] ICR 755. Boyo v. Lambeth LBC [1994] ICR 727. Janciuk v. Winerite Ltd. [1998] IRLR 63. Edwards v. Chesterfield Royal Hospital NHS Foundation Trust [2010] EWCA Civ 571; [2010] I.R.L.R. 702 – Court of Appeal creates a degree of uncertainty in this area? Addis v. Gramophone Co. Ltd. [1909] AC 488. Lavarack v. Woods of Colchester Ltd. [1967] 1 QB 278. The strict rule above sees one or two (possible) minor exceptions: Marbé v. George Edwards (Daly’s Theatres) Ltd. [1928] 1 KB 269. Dunk v. George Waller & Son Ltd. [1970] 2 QB 163. Aspden v. Webb Poultry & Meat Group Holdings Ltd. [1996] IRLR 521. Raspin v. United News Shops Ltd. [1999] IRLR 9 – a helpful case from the EAT unnecessarily overturned by the Court of Appeal in Harper? Harper v. Virgin Net Ltd. [2004] IRLR 390. The most interesting issue has been the extent to which the duty of mutual trust and confidence, and an obligation for the employer to act in good faith might be imported into the damages payable for wrongful dismissal. This is a highly controversial area of law, and insofar as it concerns damages for stigma or injury to feelings, it has probably been curtailed by the decision of the House of Lords in Johnson v. Unisys. Some have heavily criticised the decision of the House in Johnson, not least because it seems to deny many a remedy for a breach of a duty created by the common law! Clark v. BET plc [1997] IRLR 348. Clark v. Nomura International Plc [2000] IRLR 766. Mallone v. BPB Industries plc [2002] ICR 1045. Horkulak v. Cantor Fitzgerald International [2005] ICR 402. Rutherford v. Seymour Pierce Ltd. [2010] IRLR 606. Malik v. BCCI SA [1997] ICR 606. Johnson v. Unisys Ltd. [2001] ICR 480. (iv) – The Duty to Mitigate: As the employment contract is treated as any other form of contract, employees who suffer wrongful dismissal are generally required to mitigate their losses. This duty of mitigation does not operate entirely to the disadvantage of the dismissed employee, but can require the dismissed party to take steps that might be deemed to be harsh in certain cases. Abrahams v. Performing Right Society [1995] ICR 1028. Yetton v. Eastwoods Froy Ltd. [1966] 3 All ER 353. Wilding v. BT plc [2002] ICR 1079 – helpful account of the duty to mitigate by Potter LJ:
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