It is widely thought that a claim for damages resulting from a breach of the terms of a contract of employment is limited to what would be recoverable if the contract was lawfully terminated. This generally equates to the value of pay and other benefits for the contractual notice period.
However, this basis of assessment was challenged in the case of Michael Edwards -v- Chesterfield Royal Hospital NHS Foundation Trust which was recently considered by the Court of Appeal.
Mr Edwards is a surgeon and he appealed against a decision of the High Court concerning the amount of damages recoverable for his wrongful dismissal claim. He was dismissed for gross professional and personal misconduct. However, he maintained that the disciplinary procedure was not correctly applied in his case and that, had it been, a finding of misconduct would not have been made. He claimed £4.3 million comprising losses to the date of the the proceedings, future loss of income to retirement and loss of pension benefits. The High Court decided that losses should be restricted to losses arising during the contractual notice period of three months.
On appeal, it was held that he was entitled to losses for the notice period plus the time it would have taken for the disciplinary process to run its course.
On further appeal to the Court of Appeal the question was whether he could recover “damages at large” (i.e. not restricted to the time taken for the disciplinary process and the notice period provided for in the contract of employment). The court was asked to take into account the extent of damage and loss of status resulting from the dismissal as a basis for a much greater award of damages. It was submitted that because the contract of employment did not expressly exclude the type of damages he was seeking to recover, he should be awarded compensation “in full”. Mr Edwards also relied on the Human Rights Act, taking into account that public authorities as monopoly employers, were obliged to treat their employees fairly.
The Court of Appeal considered the leading judgment of the House of Lords in Johnson -v- Unisys Ltd. This decision provides that the common law does not imply a term into a contract of employment that an employer will not act unfairly towards an employee concerning the circumstances of dismissal. However, the appeal judges noted that it was recognised in Johnson that if a breach of contract was established, damages are not necessarily limited to payments due under the contract. Accordingly, assuming that Mr Edwards was successful with his substantive claim, the scope of damages should not be restricted as submitted on behalf of the Trust.
Further, the judges noted damages could take account of the loss of opportunity to hold the post of surgeon with the NHS.
The decision has a potentially wide application, particularly in respect of employees who may suffer a loss of status as the result of a dismissal. As demonstrated in this case, the value of such claims can far exceed the statutory limit on compensation for unfair dismissal (currently £65,300).
As with so many cases the decision emphasises just how important it is for employers to make sure that contractual documentation is properly drafted (and kept up to date) and that procedures are scrupulously applied. CLB Employment Solutions is designed to ensure that you have the peace of mind which comes with knowing that your employment and HR procedures are applied with the continuing assistance of specialist employment lawyers.
You can read the judgment here.