Case Analysis: Edwards v Chesterfield Royal Hospital 2010 EWCA CIV 571
The landmark ruling in this case considered what an employee can recover in a claim for breach of contract in respect of a failure by an employer to follow their contractual disciplinary procedures.
It had been held by previous case law that employees do have a right to claim damages where an employer does not follow a contractual disciplinary procedure. However, the measure of those damages was restricted to salary for the period of time it would have taken to go through the contractual procedure (fairly minimal). Specifically, an employee could not seek to argue that had the procedure been followed, they would not have been dismissed, and therefore claim damages for prolonged loss of earnings. Such a claim was governed exclusively by the unfair dismissal regime, and employees could not get round that by pursuing a court claim for breach of contract. The Court of Appeal in Edwards disagrees.
Mr Edwards sought over £4 million damages following his dismissal. He claimed that the employer’s disciplinary panel had not been constituted in line with the contractual policy, and there had been a breach of contract. Were it not for that breach, he would not have been dismissed. He sought damages for loss of earnings for the rest of his working life.
The Court held that in principle (although there were still many issues of fact for Mr Edwards to prove) the claim could succeed and he could recover damages on that basis. He would still need to show, however, that he had taken proper steps to mitigate his loss by finding other work. The Court held that the statutory unfair dismissal scheme does not impinge on any cause of action the employee might otherwise have for breach of contract and so he was perfectly entitled to seek to recover damages for all the consequences of that breach. This controversial decision is, we understand, being appealed, but is of potentially great significance. It should be noted that the Court did not award Mr Edwards £4 million – it merely found that in principle it was a valid claim.
Employers now need to review the merits of having a contractual (as opposed to discretionary) disciplinary policy as part of their suite of employment policies or part of the employment contract. One option might be to disapply the policy during the first year of employment to enable new starts to be dismissed more readily if things are not working out, or build in sufficient flexibility so that the employer has some discretion as to how to deal with matters.
If the policy is stated to be contractual, great care must be taken to ensure that it is followed to the letter. Otherwise, the door is opened for a dismissed employee to claim substantial compensation. By analogy, similar concerns must arise in relation to other contractual policies governing dismissals for redundancy or poor performance, and employers should review these also. Of course, if the policy is contractual, care must be taken in changing that policy, or the nature of it, and advice should be sought before reviewing or altering your contract or practice. The employment team at bto would be happy to assist to ensure your organisation is protected.
Contact
Caroline Carr