Employment law – Wrongful dismissal
What is Wrongful Dismissal: when your employer breaches your employment contract.
Wrongful dismissal sounds similar to unfair dismissal but they are different and you should not to confuse the two.
Wrongful dismissal occurs when your employer dismisses you in breach of the express or implied terms of his employment contract. The issue of fairness is not generally taken into account. Unlike claims for unfair dismissal there is also no qualifying period for a wrongful dismissal claim.
Wrongful dismissal can be:
If you have been summarily dismissed for gross misconduct you are not entitled notice pay; if however you did not receive notice pay and your your dismissal was for ordinary misconduct, then this could be wrongful dismissal as you should have received notice pay.
When your employer so severely undermine your employment relationship that you are entitled to resign and claim constructive dismissal.
The compensation or damages an employee may claim for wrongful dismissal are limited to the notice period and/or the period of time it would have taken to complete any relevant contractual procedure. If the employer wrongfully dismisses the employee it will be liable to pay damages to put the employee in the position they would have been in had the contract been terminated in accordance with its terms. Therefore damages will reflect the net value of salary and other contractual benefits to which the employee would have been entitled had they been allowed to work out their notice.
When the Employer may be entitled to Dismiss without Notice
Sometimes when your employment is terminated your employer wants you to leave immediately even though you are entitled to notice. In these circumstances you may be paid for your notice period immediately, this is known as ‘pay in lieu of notice’.
To be entitled to pay you in lieu of notice your employment contracts should include what is known as a PILON or ‘pay in lieu of notice’ clause. This prevents the employee from making a wrongful dismissal claim. Note though that the employee may still have a claim for unfair dismissal under Sections 94 and 98 of the Employment Rights Acts 1996.
Where there is an express PILON clause any subsequent dismissal will not be wrongful even if the employer does not actually make the payment in lieu. The contract has been lawfully terminated and the employee must claim for their notice pay under their contract, In other words they will have to make a debt claim. However where the clause is drafted so as to give the employer the discretion to make a PILON care must be taken. If the employer does not exercise its discretion to pay PILON the dismissal will still be wrongful. Where there is discretion and it is exercised to pay the PILON there is no breach of contract and the employee becomes entitled to the payment of the debt under the contract.
The Effects of Wrongful Dismissal on Restrictive Covenants (also known as Restraints of Trade)
The general rule is that a wrongful dismissal will free the employee from any covenant in restraint of trade. The logic is that the employer committed a repudiatory breach of contract by dismissing the employee in breach of the notice provisions. Consequently the employee is entitled to treat himself as discharged from any further performance of his obligations under the contract. Where there is a PILON clause in the contract and the employer makes the PILON clause the restrictive covenants are preserved.