HAS UNFAIR DISMISSAL RENDERED THE COMMON LAW ACTION FOR WRONGFUL DISMISSAL EFFECTIVELY REDUNDANT?

Updated: Jun 2



This study aims to provide a new understanding of a hidden reasoning that may be understood to embody the judicial approach to termination and dismissal. First the paper will discuss the difference between unfair dismissal (“UD”) and wrongful dismissal (“WD”). Second this paper will look at two employment disputes of two different types of claimants to argue that WD and UD are two distinct types of claims and they it will be argued depending which type of claimant, there is some overlap between WD and UD where one is dependent on the other. Third this paper will examine other reasons for WD becoming effectively redundant. Fourth this paper will argue both causes of action have their place, the advantages each has over the other. Lastly this paper will conclude its findings.


Phillips, J.[1] has drawn the distinction between WD at common law and UD under statute.[2] He points out UD and WD are traditionally separate claims. WD is an action in contract, applicable when an employee has been dismissed by their employer in a way that does not comply properly with the terms of their employment, usually with no or inadequate notice of termination. UD on the other hand, is to do with the reasons for the dismissal, and the fairness of the circumstances around it. Unlike WD, it is a claim based in statute rather than common law, with a test largely based on whether the employer acted reasonably.


Claimant 1 (“C1”) is a Football Manager for Chelsea FC. C1 has a signed a four year fixed contract in 2015 and his job was terminated after 4 months.[3] C1 is on a fixed-term contract, and so would not have an UD claim at the EDT. Assuming that there is not, and that he has not been fired for misconduct, the starting point is that he will expect to be paid out for the full value of the time remaining on his contract – right up until the summer of 2019, at full salary (worth around £30m). Chelsea FC would need to make sure that they fulfil the contract – if they do not then C1 may have a claim for WD.


C1 would be advised to bring his claim for £30m in the High Court because the maximum amount that can be claimed in an Employment Tribunal in relation to WD is £25,000.[4] High earner contracts like C1’s goes beyond the statutory minimum provided by unfair dismissal legislation and other legislation,[5] but there is no such cap in the County or High Courts. If C1 has a high value WD claim, then it is of paramount importance that the claim is brought in the most appropriate Court or Tribunal.


In this case study WD has no bearing on the use of an UD claim, and therefore is what we can point to in demonstrating that UD has not rendered the common law action for WD effectively redundant. It just depends which claimant is using it. In relation to C1 he did not peruse the full £30m but rather his lawyers negotiated him an £11m severance package.[6] Other important economic useful when the employee accepts that he is dismissed and the reasons why and there are no dispute as to whether the reasons factors comes into play such as will C1 be restricted from work with another club, etc. It is more are fair. They simply want and deserve as per their contract, a better deal in leaving.


Claimant 2 (“C2”) works in the kitchens of Wetherspoons as a chef and was dismissed after sharing pub chain’s food secrets on TikTok.[7] Although this never made it to the Employment Tribunal we can examine the dispute. If C2 had the requisite qualifying service he could bring a claim for UD along with the possibly of a whistleblowing claim. To bring a claim C2 must show that he was in fact dismissed. If both conditions are met, the employer then is burdened to prove that they exercised a fair reason for the termination of employment. One of the other claims C2 would bring is also a WD claim for his requisite notice period. Unlike UD, there is no eligibility criteria governing WD claims, other than what is stated in the contract, thus the right to claim a breach of contract will be limited or determined by the contract.[8]


In most situations we can assume that C2 would be fired without notice because he committed gross misconduct.“Summary dismissal” as is another term for this. In situations such as this, there will likely be a contractual provision that entitles the employer to bypass the notice/pay period for said dismissal was gross misconduct. For the purposes of this point that situation will be focused on to demonstrate the overlap between the two claims. The most relevant cause of action for C2 at first is UD. If the UD claim is won, and it is determined that C2’s employer should not have fired him for gross misconduct or did not follow the proper procedure, C2 will then be entitled to claim the notice that he should have received under his contract. Therefore it is argued in this situation C2’s claim for WD is dependent on a positive finding in his favour for the UD claim. In C2’s case there is very much an overlap between both claims. However the WD claim will not be a lucrative one as notice periods in C2s job will be low. For example statutory notice is one week’s pay for every year served. The WD claim has become like a smaller carriage on the employment litigation train, with the large carriages of unfair dismissal, whistleblowing and discrimination placed in front which would may led to the Claimant leaving their workplace.Smith and Woods argue that the statutory action for UD is more important than WD due to its easier procedure, the possibility (at least in theory) or reinstatement or re-engagement, and the more liberal and realistic approach to compensation.[9] However, albeit a set procedure that is to be followed, the steps are lengthy and are by no means in practice an easy hurdle to overcome, due to the number of obstacles one must pass to be successful in their claim and especially considering that in 2019/2020 the EAT disposed 1100 out of 1400 appeals[10].


In regards to other ways UD has perhaps practically rendered WD redundant, Taylor and Emir argue that in recent times WD has indeed been superseded to an extent by UD law which provides a more satisfactory remedy for most who are dismissed.[11] This is because damages are usually higher and employees have a possible chance to return to their jobs, on the basis that they dispute the dismissal itself[12].


Another reason there is a possible decline in WD claims is because the law on WD is clear and employers are well aware that not paying an employee their correct notice period and complying with the employment contract will result in litigation that they will inevitably lose on the facts, as breach of contract.[13] So there is a strong incentive for employers to pay up and this result in claim not being brought. UD on the other hand is less concrete, based on reasonableness and intrinsically tied to discrimination, the lines are murkier, it is harder for the common worker to prove, and therefore something an employer could conceivably get away with using their most reasonable sounding excuse, backed by insurance to cover their legal fees.[14]


The Acas Early Conciliation scheme is a form of mediation and is the first step in the legal process[15]. A certificate is needed from Acas before a claim is brought to the ET. Following form the argument above, if the law on WD is clear, another reason WD claims are becoming redundant is Acas will talk to both the claimant and the respondent about the disagreement during early conciliation. It allows both parties to reach an agreement without the need to go to an Employment Tribunal.


Furthermore, depending on whether or not you want legal counsel, the cost of an Employment Tribunal to an employee might be several or even tens of thousands of pounds. In many situations, the legislation used to be simple enough that employees could represent themselves in front of a tribunal. However, as the procedure has gotten increasingly complicated, most individuals choose for legal assistance to skillfully lead them through it and protect their interests. It may be more advantageous to avoid this situation by reaching a commercial settlement.These two points demonstrate further possible reasons why WD claims are brought less frequently. On this one could say that proves UD is overriding WD by merit and becoming so much more prevalent, but WD is still something that certainly has its place and value[16] to certain claimants like C1 who could not substitute their claim with UD.


One of the most significant advantages of initiating an action under the common law is that it avoids the statute's qualifying criteria.[17] This is seen in C1’s case. C1 does not have the requisite qualifying period, he is on a fixed term contract, and he has the right to sue for the full amount owed on the contract under common law. This is financially beneficial since the award may be greater than the statutory scheme's entire maximum amount.[18] There is no flexibility in the common law; natural justice is the standard. Lord Wilberforce refused to accept as inevitable the existence of partnerships in which all of the standards of natural justice are disregarded.[19]


When opposed to UD, WD has a number of drawbacks. If no damage occurs prior to the dismissal, the terminated employee will only be able to collect his income for the contractual notice period, as previously stated. Furthermore, unlike WD remedies, C1 has no capacity to obtain specified performance,[20] i.e. no prospect of re-employment.[21] The claimant does not have recourse to specialised tribunals, which are made up of laypeople with experience in industrial justice. May LJ was clever in seeing this:[22]“Employment disputes… are generally best considered not by the divisional court but by an industrial tribunal to the members of which, both lay and legally qualified, such overtones or matters of principle are common currency.” (Emphasis added)


Thus in conclusion, UD has not made WD redundant, as both causes of action cater to different things, but UD has certainly become the more common and mainstream cause of action among employees. UD can be seen as the remedy for the common man, and WD for the higher earning professional. This is illustrated clearly by the case studies of the two claimants on opposite sides of the spectrum. C2 may encapsulate most of the claims (as explored) and may be more advantageous in net comparison, but that does not justify removing provisions designed for the minority of claims such as C1. Both have their advantages and disadvantages, and one can be used to get to another, but that is for the individual claimant to weigh up.


FOOTNOTES

[1] W. Deris & Sons Ltd v. Atkins [1976] 1CR 196 particularly at p.203 [2] s.94(1) Employment Rights Act (ERA) 1996 [3] Orr, James, Jose Mourinho 'would receive £37m pay-out' if he is sacked by Chelsea, Independent, Wednesday 07 October 2015, at https://www.independent.co.uk/sport/football/premier-league/jose-mourinho-would-receive-ps37m-pay-out-if-he-sacked-chelsea-a6684576.html [4] Official Statistics Tribunal Statistics (https://www.gov.uk/government/statistics/tribunal-statistics-quarterly-april-to-june-2020/tribunal-statistics-quarterly-april-to-june-2020) [5] Horkulak v Cantor Fitzgerald International [2004] EWCA Civ 1287 [6] Law, Matt Chelsea paid Jose Mourinho and staff £8m in compensation to sack them, almost a third of the sum it cost in 2007, The Telegraph, 13 January 2017, at https://www.telegraph.co.uk/football/2017/01/13/chelsea-paid-jose-mourinho-staff-8m-compensation-sack-almost/ [7] King, Jordan, Wetherspoons chef who revealed kitchen secrets on TikTok has been fired, Metro, Wednesday 23 Sep 2020 at https://metro.co.uk/2020/09/23/wetherspoons-chef-who-revealed-kitchen-secrets-on-tiktok-has-been-fired-13312192/ [8] Masiak v. City Restaurants (UK) Ltd [1999] IRLR 780 [9] Smith, I, Baker, A, Warnock, O, Smith and Wood’s Employment Law (13th edition, Oxford University Press, 2017), 481 [10] Official Statistics Tribunal Statistics https://www.gov.uk/government/statistics/tribunal-statistics-quarterly-april-to-june-2020/tribunal-statistics-quarterly-april-to-june-2020 [11] Employment Law an Introduction, (5th edn, OUP) p177 [12] Raday, F, Costs of dismissal: An analysis of community justice and efficiency, (1989) 9 International Review of Law and Economics, 181 [13] Williams, K, Unfair Dismissal and Job security, (1975) 38 Modern Law Review, 292 [14] Deakin, Sand Morris, G, Labour Law (3rd Edition) (Butterworths, London, 2001) [15] Watt, B, Regulating the employment relationship: from rights to relations in Legal regulation of the employment relation, eds Collins, H Davies, P and Rideout, P (Kluwer, London, 2000) [16] Kilpatrick, C, Has new labour reconfigured employment legislation? (2003) 32 Industrial Law Journal, 135 [17] s.94 Employment Rights Act 1996 [18] The cap on the compensatory award for ordinary unfair dismissal as of 6th April 2021 is £89,493 (or 52 weeks’ gross pay, if lower). [19] Carty, H, Dismissed employees: The search for a more effective range of remedies (1989) 52 Modern Law Review, 449 at page 454 [20] ERA 1996, s.114, s.115 [21] Williams, K and Lewis, P., The aftermath of reinstatement and re-engagement, (1981) Research paper No 23 London [22] R v East Berkshire Health Authority ex parte Walsh[1984] IRLR 278; at paragraph 38 (CA)


Bibliography


Books


Deakin, Sand Morris, G, Labour Law (3rd Edition) (Butterworths, London, 2001)


Gwyneth Pitt, Pitt’s Employment Law (10th edn, London, Sweet&Maxwell ,2016)


Smith, I, Baker, A, Warnock, O, Smith and Wood’s Employment Law (13th edition, Oxford University Press, 2017)


Watt, B, Regulating the employment relationship: from rights to relations in Legal regulation of the employment relation, eds Collins, H Davies, P and Rideout, P., (Kluwer, London, 2000)


Journals


Carty, H, Dismissed employees: The search for a more effective range of remedies (1989) 52 Modern Law Review, 449


Kilpatrick, C, Has new labour reconfigured employment legislation? (2003) 32 Industrial Law Journal, 135


Raday, F, Costs of dismissal: An analysis of community justice and efficiency, (1989) 9 International Review of Law and Economics, 181


Williams, K and Lewis, P., The aftermath of reinstatement and re-engagement, (1981) Research paper No 23 London

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