What is wrongful dismissal?

Wrongful dismissal is a termination in breach of a contract, such as:

• an employment contract
• a contract for services
• a service agreement
• a partnership agreement
• a shareholders agreement
• a consultancy agreement.

Unlike unfair dismissal, fairness is not an issue and the sole question is whether a term of the contract has been breached. If it has, an employee will have a claim for damages.

What types of wrongful dismissal claim are there?

These are primarily:

• breach of contractual notice, whether express or implied
• breach of a contractual procedure (eg disciplinary or redundancy)
• termination of a fixed-term contract or a specific task contract before its expiry.

The most common type of claim is for breach of a notice period.

Notice periods

These may derive from:

• statute (section 86 of the Employment Rights Act 1996)
• an express term in the contract
• an implied term of the contract – reasonable notice.

The statutory minimum notice period is 1 week’s notice for each year of employment to a maximum of 12 weeks.  In the absence of an express term in the contract, the notice period will be at least the statutory minimum.  If an express term of the contract is less than the statutory minimum notice period statute will trump the contract.

In addition, where there is no express notice period in the contract, the common law provides that reasonable notice should be given, which may be longer than the statutory minimum notice period (Hill v Parsons).  For example, an executive who has been employed for 4 years would be entitled to 4 weeks’ statutory minimum notice but nevertheless a court or tribunal will consider all the circumstances of the case and could conclude that it is industry practice that such executives normally receive 3 months’ notice.

Therefore, where an employer fails to provide an employee with the correct notice they may have a remedy for breach of contract and not breach of the statutory right.

Contractual procedures

Where there is a contractual obligation to follow a procedure before terminating the contract and an employer fails to follow it, an employee may be able to claim for the loss of wages for the period of time that the procedure would have taken had the employer followed it (Gunton v Richmond upon Thames LBC).

Fixed-term contracts

Where a fixed-term contract or a specific task contract is terminated before the term expires or the task is complete, this will amount to a wrongful dismissal unless the employer can point to a term of the contract which entitles it to dismiss early. If the employer is in breach, it will have to pay the employee for the period between the termination date and the date when the contract would have expired.

Interpretation of clauses often vital with wrongful dismissal

Given the types of clauses and issues outlined above, disputes often relate to the interpretation of those clauses. Generally, courts and tribunals tend to be more willing to find clauses should be held in whole or part against an employer due to the perceived inequality of bargaining position. However, where there has been negotiation by both an employer and an employer as to the terms of the contract this may not be the case, as the courts and tribunals may take the contract at face-value, as it represented the intention of the parties at the time the contract was agreed.

What is the difference between unfair dismissal and wrongful dismissal?

The following differences between wrongful and unfair dismissal should be noted:

• wrongful dismissal gives rise to a common law action for breach of contract that can be pursued in the civil courts or an employment tribunal, whereas unfair dismissal is statutory claim only which can only be brought in the employment tribunal
• in a wrongful dismissal claim, a court or tribunal is concerned with whether a breach of contract occurred. In an unfair dismissal claim, the function of the tribunal is to consider the fairness of the dismissal
• unlike most unfair dismissal claims, there is no qualifying period to bring a wrongful dismissal claim
• an employer defending a wrongful dismissal claim can rely on facts that they found out after the dismissal but in an unfair dismissal claim, a tribunal will consider if the dismissal was fair on the basis of what the employer knew at the time of the dismissal.

Can a dismissal be wrongful but not unfair?

A dismissal can be wrongful but not unfair. 

For example, an employee may have been dismissed by reason of misconduct where an employment tribunal considers the employer acted fairly in dismissing the employee (see web page Unfair Dismissal) but nevertheless concludes that the conduct in question was not sufficiently serious to amount to a repudiatory breach warranting summary dismissal.

What remedies are available for wrongful dismissal?

A claim for wrongful dismissal may be brought in the civil courts or the employment tribunal. 

Employment tribunals have jurisdiction to hear claims which arise or are outstanding on the termination of an employee’s employment only under the Employment Tribunals Extension of Jurisdiction (England and Wales) Order 1994.

Wrongful dismissal damages are limited to the notice period and/or the period of time it would have taken to complete a relevant contractual provision or the date the contract should have ended. If an employer wrongfully dismisses an employee, the employer will be liable to pay damages to put the employee in the position they would have been in had the contract been terminated in accordance with its terms. Therefore, damages will reflect the net value of wages and any other contractual benefits to which you would have been entitled had you been allowed to work out your notice.

The damages recoverable in an employment tribunal for wrongful dismissal is capped at a statutory maximum of £25,000. There is no such limit in the civil courts.

What are the differences between a wrongful dismissal claim in a civil court and an employment tribunal?

There are several differences between bringing a wrongful dismissal claim in the civil courts than in the employment tribunal:

• the time limit for a tribunal claim is 3 months less a day (plus any extension due to participation in Acas early conciliation) and for a civil claim it is 6 years
• tribunal claims are capped at £25,000 but civil claims are uncapped
• a tribunal does not have jurisdiction to make a declaration or an injunction
• costs follow the event in civil courts (ie the loser pays the winners costs) but in tribunals generally costs are not awarded against a losing party (unless a party has acted unreasonably)
• the costs in civil claims are generally more than tribunal claims
• tribunal claims are generally resolved quicker than civil claims.

The material contained in this web page is provided for general purposes only and does not constitute legal or other professional advice. Appropriate legal advice should be sought for specific circumstances and before action is taken.