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Manners don't cost a thing: Losses flowing from the manner of an unfair dismissal

Edwards (Respondent) v Chesterfield NHS Trust (Appellant) and Botham (Respondent) v MOD (Appellant) [2011] UKSC 58

The Supreme Court has held that employees may not recover damages for loss resulting from breach of a term in their employment contract concerning the manner of their dismissal unless the loss can be said to be independent of the dismissal.

Both Mr Edwards and Mr Botham were dismissed for reasons of misconduct following disciplinary proceedings. Their employment contracts contained express terms governing the procedure for dismissal in misconduct cases. Each claimant sought to recover damages for loss arising from procedural breaches in the manner of the dismissals in breach of these express terms.

Their claims were commenced in the High Court for breach of contract. Neither claim succeeded. Loss arising from the unfair manner of dismissal is not recoverable as damages for breach of the implied term of trust and confidence in employment contracts. Such loss falls within the so called 'Johnson' exclusion area (Johnson v Unisys [2001] UKHL).

Both cases were successfully appealed to the Court of Appeal. The appellant employers' appealed to the Supreme Court on the following: (i) whether Johnson applies to preclude recovery of damages for loss arising from the unfair manner of a dismissal in breach of an express term of an employment contract; and if so (ii) whether the claims made fell within the Johnson exclusion area.

The Supreme Court by a majority of 4-3 allowed the appeals. Provisions about disciplinary procedures incorporated as express terms of an employment contract are not ordinary contractual terms. Such terms are not taken to intend that failure to comply with contractual disciplinary procedures will give rise to a common law claim for damages regardless of whether the terms were expressed or implied. This would be contrary to Parliament's development of the law of unfair (not wrongful) dismissal. Compensation for the manner of dismissal is instead limited to what one may recover pursuant to the Employment Rights Act 1996.

Whether a case falls within the Johnson exclusion area is a matter of fact depending on whether the procedural breach forms part of the dismissal process. Both these cases fell within the area.

Vaughan Jacob / 1st Feb 2012


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