Supreme Court preserve the limitations on recovery for breach of contractual disciplinary procedures

Established legal principles have been understood as limiting contractual damages for wrongful dismissal to the pay that would have been received in the notice period plus (in the appropriate circumstances) the pay for any period which would have been required to conduct disciplinary proceedings in accordance with the contractual scheme. The common law does not provide a remedy for loss arising from the manner of a dismissal or the other consequences of dismissal. Parliament created a statutory scheme providing a remedy for unfair dismissal, administered by the Employment Tribunal, with caps on the awards which can be made.

In the case of Johnson v Unisys [2001] UKHL13 the House of Lords ruled that the existence of that specialist statutory scheme prevented the common law from providing another remedy for a breach of an implied term in the contract in respect of the conduct of disciplinary proceedings or the manner of dismissal.

In Edwards v Chesterfield Royal Hospital NHS Foundation Trust [2010] EWCA Civ 571 the Court of Appeal held that that limitation did not apply where the disciplinary scheme was provided for by express terms of the contract of employment. That decision has now been reversed by a majority (4-3) of the Supreme Court in that case and the linked case of Botham (FC) v MoD [2011] EWHC 646.

The Facts

Mr Edwards is a consultant surgeon who was summarily dismissed for gross personal and professional misconduct. Mr Edwards claimed that the Trust had breached his contract by failing to afford him a proper disciplinary hearing and that such a hearing would not have resulted in his dismissal.

The Investigating Committee of the GMC closed its investigation of the allegations against Mr Edwards without any adverse consequences for him. Mr Edwards sued for breach of his contract and claimed damages totalling in excess of £3.8 million, which included damages for loss of future earnings. Such damages were plainly in excess of the cap on compensation (around £68,400) available at the Employment Tribunal. The Trust sought to have the claim struck out, arguing that Mr Edwards’ entitlements were limited to those available in the Employment Tribunal and pay in lieu of his 3 months contractual notice period. The Trust succeeded in the County Court, that decision was partially reversed in the High Court and Mr Edwards won in the Court of Appeal.

The Decision

In the conjoined cases of Edwards v Chesterfield and Botham v Ministry for Defence [2011] UKSC 58 the Supreme Court was asked to determine whether the existence of the statutory scheme for unfair dismissal precludes the recovery of damages by an employee for loss arising from the unfair (in breach of contract) manner of dismissal. A majority of the Court (4-3) held that it does, saying:

‘the unfair dismissal legislation precludes a claim for damages for breach of contract in relation to the manner of dismissal, whether the claim is formulated as a claim for breach of an implied term or as a claim for breach of an express term which regulates the disciplinary procedures leading to a dismissal.”

Lord Philips thought that could only be overcome by an express term in relation to disciplinary hearings, tantamount to a term that the employee would not be dismissed without cause.

Whether a dismissal is unfair because of damaging findings or damage to the employee’s reputation from the fact of dismissal is a matter to be adjudicated by the specialist employment tribunal rather than the ordinary courts. Compensation is to be determined in accordance with the statutory scheme. Compensation is recoverable for the fact and manner of a dismissal in the Tribunal, subject to the overall cap.

Discussion

A consequence of the Court’s judgment is that an employee who is subject to a disciplinary process is still able to seek an injunction to restrain the threatened or actual breach in advance of the dismissal but cannot sue for damages consequent on the dismissal. Moreover an employee who is subject to a disciplinary process in breach of contract which results in a sanction short of dismissal may sue for damages in the Court, but would have to prove the loss.

Self-evidently the remedies under the statutory unfair dismissal scheme are only available to those who are dismissed, and who meet qualifying length of service criteria. At present the requirement is 1 year of continuous service (save in special cases) but that is set to increase to 2 years in April 2012.

As a result of that change and this judgment an F2 doctor dismissed in the middle of second year following a disciplinary process in breach of his contract will have no claim under the statutory unfair dismissal scheme and will be limited to pay in lieu of his notice period.

The Supreme Court’s decision will undoubtedly come as a disappointment to Mr Edwards and those in a similar position. Highly skilled professionals will rightly be concerned that adverse findings in internal/employer conducted disciplinary hearings will spell the end of a career and that a finding of unfair dismissal in the Employment Tribunal months later will be too late to rescue their reputations and be too little to compensate them for their actual losses. For such practitioners the Supreme Court’s decision highlights the importance of considering injunctive relief to ensure fair and proper disciplinary procedures in the hope of averting dismissal or, in extreme circumstances, to reverse the dismissal.

The logic of the Supreme Court’s decision is that a dismissal in breach of MHPS may not give rise to a remedy in damages more favourable than for any other employee dismissed in breach of contractual disciplinary procedures. However it has been recognised by the courts that disciplinary proceedings for doctors and dentists may engage Article 6 of the ECHR. A dismissal in breach of Article 6 would entitle the employee to damages under the Human Rights Act. Given the divisions in the Supreme Court in this case it may not be very long before the issue is revisited and it is likely that this decision will be the subject of more detailed analysis in the coming months.

Stewart Duffy
stewart.duffy@rlb-law.com

Alex Leslie
alex.leslie@rlb-law.com

© RadcliffesLeBrasseur


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