Wrongful Dismissal: Your Rights
This is essentially a breach of contract claim by the employee. If the employer acts in breach of the employee's contractual obligations or in breach of his minimum statutory obligations to give the employee notice (see Notice) the employer then becomes liable to pay the employee damages for wrongful dismissal. This is quite distinct from the employee's right to claim compensation for unfair dismissal.
Where an employee has, for example, a 3 month notice clause in his contract and the employer dismisses the employee with immediate effect, then prima facie the employee is then entitled to make a claim for wrongful dismissal for damages which will reflect the 3 month notice that he should have received. The employee will also be entitled to other contractual benefits, such as accrued holiday pay.
Senior managers may find it more preferable to bring a claim for wrongful dismissal, as opposed to unfair dismissal, where they have lengthy notice periods because they stand to gain more from damages for breach of contract (representing perhaps the whole of the notice period they should have been given). As opposed to the amount they could have received on an unfair dismissal claim.
"The employee will also be entitled to other contractual benefits, such as accrued holiday pay."
If an employee is dismissed as a result of gross misconduct, ie theft, and the employer was justified in dismissing the employee in this way, there can be no claim for wrongful dismissal. In effect the employee will have been treated as repudiating the implied term of trust and confidence between the parties, which the employer then accepts by the summary dismissal.
Dismissals with pay in lieu of notice
It is common for an employer not to require an employee to work out his notice period and to pay him in lieu of notice. Such payment in lieu of notice is usually regarded as damages for wrongful dismissal (unless otherwise specified in the contract). In these circumstances, the employer would not be in breach of contract by making a payment in lieu and it is therefore unlikely that there could be any claim for wrongful dismissal.
If there is no contractual right to terminate by making a payment in lieu of notice, then the making of such a payment may not extinguish the employee's claim for damages unless, in all respects, the employee is put in the same position as he would have been in if notice had been given.
Amount of damages
The amount of damages for wrongful dismissal is based on pay and other benefits, such as the use of a company car, which the employee would have received if the employer had complied with his contractual obligations. An employee may put in a claim for other contractual benefits such as discretionary bonus payments which they will have missed out on, although it can be difficult to prove such a claim. If the employee finds a new job within the period of notice, which he would have been entitled to from his old employer, then he is not entitled to a double recovery. The new salary received must be taken into account in calculating the loss to the employee. It should be remembered that the employee is under a duty to take all steps to mitigate his loss, ie seek such alternative employment.
Any damages which an employee receives under wrongful dismissal will reduce the amount of the compensatory award under unfair dismissal by the same amount.
When should an employee make a claim?
An employee should make a claim for wrongful dismissal in the Employment Tribunal within 3 months from the effective date of termination of his employment.
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Philip Landau is a solicitor and partner, specialising in employment law, in the London legal firm Landau Zeffertt Weir.