The recent Court of Appeal decision in Edwards v Chesterfield Royal Hospital NHS Foundation Trust has clarified the right of employees to bring a free standing claim for general damages where an employer has breached a contractual disciplinary process.
Mr Edwards worked as a Consultant Surgeon for the Trust. He was dismissed for personal and professional misconduct and brought a claim for £4.3 million arising from the failure by the Trust to follow the proper contractual disciplinary process, which led to his dismissal. The basis for his claim was that:
- the Trust's disciplinary procedures were contractual;
- under them, he was entitled to a formal disciplinary hearing by a panel to include a clinician of the same medical discipline as him and a legally qualified chairman and also that he was entitled to be legally represented at the hearing;
- the disciplinary hearing which resulted in findings of misconduct against him was not held in accordance with the terms of his contract. Specifically, the panel did not include a clinician of the same discipline as him nor a legally qualified chairman and his request to be allowed legal representation was refused;
- he was dismissed based upon the panel’s findings;
- had the disciplinary hearing been convened in accordance with the contract, the panel would not have found him guilty of personal and professional misconduct and he would not have been dismissed; and
- since he was dismissed on the grounds of personal and professional misconduct (which included dishonesty), he has been unable to find comparable alternative employment.
As a result, Mr Edwards claimed the salary and benefits (including pension) which he would have enjoyed had he continued to work for the Trust until he retired.
The matter was referred to the Court of Appeal to answer the specific question as to whether in principle an employee is entitled to be compensated for losses flowing from a breach of an express contractual provision relating to the dismissal process. The question is not quite as straightforward as it sounds.
The starting point for the Court was that an employee has no right to continue in employment indefinitely. This is because an employer is always able contractually to dismiss the employee by giving the requisite contractual notice. On its face, this basic principle would suggest that an employee would have no basis to claim for loss of salary or benefits until retirement since any claim for breach of contract in relation to dismissal would be limited to the value of lost salary and benefits attributable to the period of notice over which the employer is entitled to terminate employment.
Separately, where an employee complains about the reason for, or the process leading to, dismissal, he or she can claim compensation in the Employment Tribunal under the statutory unfair dismissal regime. The existence of a remedy for unfair dismissal would suggest that where an employee had been subject to a procedurally flawed dismissal, their claim would be limited to the maximum compensatory award of £65,300.
In 2001, the House of Lords considered a similar, though subtly different, claim for career loss damages brought by an employee who claimed to have been dismissed in breach of contract (Johnson v Unisys). In that case, the employee argued that his employer had dismissed him in a manner which breached the implied contractual duty not to undermine trust and confidence. The House of Lords rejected the claim. It found that Parliament had provided a limited remedy for flaws in the dismissal process under the unfair dismissal regime and it would not be appropriate for the law to develop in a way so as to accommodate a contractual claim. In reaching this decision, the Court found that the implied duty of mutual trust and confidence related only to the currency of the employment relationship and not to the dismissal process.
When the above principles are taken together, it is not surprising that the Trust argued that Mr Edwards was not entitled to recover compensation over and above losses arising from his notice period plus £65,300 for unfair dismissal. However, the Court decided that unlike in the Johnson case (which was based upon a breach of a general implied term), because Mr Edwards’ contract contained express provisions relating to the disciplinary process, there was no reason why the parties should not have intended those provisions to sound in damages in line with usual contractual principles. Accordingly, there was no reason in principle why Mr Edwards should not be able to bring a freestanding claim for damages for career loss arising from the Trust’s failure to comply with the contract. Armed with that clarification, Mr Edwards continues to pursue his potentially valuable damages claim in the High Court.
This case serves to underline the importance for employers of ensuring their disciplinary and grievance procedures are non-contractual and afford adequate flexibility. For public sector employers or for those private employers who have adopted contractual procedures, the lesson is very simple—to avoid damages claims, ensure that contractual procedures are followed rigorously.