Employment Law Watch : Employment & Labor Lawyer & Attorney : Reed Smith Law Firm

The Court of Appeal has ruled that an employee subject to a contractual disciplinary procedure, who was dismissed for misconduct in breach of that procedure may, in principle, recover damages for loss of future employment prospects. The case of Edwards v Chesterfield Royal Hospital NHS Foundation Trust represents a significant departure from decades of established case law concerning the calculation of damages for wrongful dismissal. The decision (which we understand is being appealed) potentially opens the door to huge loss of earnings awards for employees who are unable to find alternative employment due to loss of reputation because of their dismissal.

What happened in this case?

Mr Edwards was employed by the Chesterfield Royal Hospital Trust (the “Trust”) as a consultant surgeon. In 2006 he was dismissed for gross professional and personal misconduct following a disciplinary hearing and had since then been unable to obtain work as a permanent consultant. Mr Edwards maintained that if the contractual disciplinary procedure to which he was subject had been followed correctly, he would never have been dismissed. He brought a High Court claim seeking damages for breach of his contract of employment in the sum of little under £4.3 million (including a loss of earnings claim for £3.8 million to cover his loss of employment income from dismissal to retirement at age 65).

Usually a wrongful dismissal claim would be limited to loss of earnings over the contractual notice period and, where there is a contractual disciplinary procedure, the period in which the procedure should have been followed. Since Mr Edwards’ claim went beyond this (to include loss of earnings to retirement), the Trust applied for an order from the Court that any damages which exceeded the loss of earnings over the notice period should be struck out. This matter was dealt with as a preliminary issue and for those purposes the Court only had to consider whether Mr Edwards had any real prospect of recovering, after trial, damages in excess of the loss of earnings over the notice period. For this purpose, it was entitled to assume that Mr Edwards would succeed in all the allegations made in his Particulars of Claim.

The issue finally ended up before the Court of Appeal, and the issue the Court had to consider was whether Mr Edwards was entitled to damages for loss of professional status in circumstances where, if the disciplinary proceedings had been conducted properly and not in breach of contract, he would not have been dismissed. The Court concluded that damages should not be limited to damages over the notice period and the time which the employer would have taken for the disciplinary procedure to be followed.

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Overview

During the past year, there have been a number of cases which have impacted on the area of dismissals. We consider the major cases below:

Unfair dismissal

In order for a dismissal to be fair, an employer has to show:

1. that it has a potentially fair reason for dismissal; and
2. that the dismissal is reasonable in all the circumstances.

When assessing “reasonableness”, the Tribunal will look at the employer’s dismissal procedure to see whether it satisfies this test.

In West London Mental Health NHS Trust v Sarkar, the Employment Appeal Tribunal (EAT) held that an employer acted reasonably in dismissing an employee for gross misconduct under its formal disciplinary procedure, despite initially taking the view that the misconduct could be dealt with under an informal procedure designed to deal with less serious matters.

It was found that the employer was entitled to consider further incidents of poor conduct which occurred and justified a change in approach.

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The Secretary of State has approved the new draft ACAS Code of Practice on discipline and grievances following public consultation. The new draft Code has been revised to take into account the changes proposed to be made to workplace dispute resolution procedures by the Employment Act 2008, which received Royal Assent on 13^th November.

In the consultation, which ended in July this year, the draft Code was criticised for being too vague, which it was suggested, could have led to increased litigation. The revised Code has addressed some of these concerns by adding more detail, but this may have the effect of restricting flexibility and leave employers open to challenge when mistakes or omissions are made.   Employers should now think about what changes are needed to disciplinary and dismissal, capability, performance and grievance policies in time for 6 April 2009 when the Code is likely to come into force.

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In Towergate London Market Ltd v Harris the Court of Appeal held that a claimant was entitled to a three-month time extension to bring her unfair dismissal claim, since she had reasonable grounds to believe that a dismissal procedure was ongoing upon the expiry of the original time limit. The Court reached this conclusion despite the fact that the claimant had not appealed internally against her dismissal under any formal process, but rather had raised a post-employment 'grievance' with her employer.

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