Free Employment Advice - Breach of Contract: Unfair Dismissal

E and W were employed by M. E was subjected to what was described as “almost twelve months of pernicious behaviour” including harassment and the pursuing of false allegations. He complained to his doctor of stress and depression, and was diagnosed as suffering from psychiatric injury as a result of his treatment at work. W was subjected to similar treatment.

Both E and W were dismissed and complained of unfair dismissal to an employment tribunal. By the time of their dismissal, both were suffering from stress. Their claims succeeded and they were awarded compensation. Following this, they started proceedings in the county court in contract and negligence, claiming compensation for stress-related illness, depression and inability to work.

The contract claim was based on a breach of the implied term that neither party would damage the relationship of trust and confidence between employer and employee.

The negligence claim was based on an alleged breach of duty of care by the employer. At first instance, the claims were dismissed. E and W appealed to the Court of Appeal.

Decision:

1. The appeals should be dismissed.

2. Unfairness in the manner of dismissal of an employee did not give rise to a common law action, whether founded in contract or in negligence, but must be the subject of employment tribunal proceedings.

3. The way in which E and W had been treated by their employer was part of the circumstances surrounding their dismissal. This meant that their claim must be brought in the employment tribunal and could not be the subject of civil proceedings. Such proceedings were precluded where they concerned the circumstances of a dismissal, which might include a pattern of events stretching back over a period of time.

The Court of Appeal applied the statement of Lord Nicholls in the case of Johnson v Unisys Ltd [2001] IRLR 279, as follows: “ A common law right embracing the manner in which an employee is dismissed cannot satisfactorily coexist with the statutory right not to be unfairly dismissed. A newly developed common law right of this nature, covering the same ground as the statutory right, would fly in the face of the limits Parliament has already prescribed on matters such as the classes of employees who have the benefit of the statutory right, the amount of compensation payable and the short time limits for making claims. It would also defeat the intention of Parliament that claims of this nature should be decided by specialist tribunals, not the ordinary courts of law”.

Comment:

The main significance of this case seems to be that where an employee is dismissed, his or her remedies are limited to claims in the employment tribunal. This means that, in non-discrimination cases, compensation will be limited to the statutory maximum of £52,600. It has been commented that the case may be seen as creating an incentive for employers who have treated their employees badly to dismiss employees. If they do not dismiss, then employees may be able to make claims in the civil courts where compensation is unlimited.