Employment Law

        The procedure and qualification for an individual contract of employment is laid out in the Employment Rights Act 1996 (Part I Employment Particulars), this requires the employer to provide a statutory written statement of particulars of employment, s.1(4) specifically requires that the statement includes particulars in regards to substantive terms such as remuneration, hours of work, holiday and sick pay. Section 4 of the act states that any changes to the relevant terms and conditions of the contract must be notified to the employee within one month. These changes need to be mutually agreed and can not be imposed without acceptance on the part of the employee and any imposition of these changes may find the employee walking out and a constructive dismissal claim brought against the employer as in Greenway Harrison Ltd v Wiles, the employer could also face a claim for repudiatory breach of contract, particularly in relation to the reduction of wages as was seen in Rigby v Ferodo Ltd.  However it may be necessary to introduce such unilateral changes in order to maintain the survival of the business, as has been recognized in the context of redundancy law, and in that case the employer may choose to dismiss the employee who refuses to change by giving him proper notice. This may still lay the employer open to an unfair or wrongful dismissal action from the employee.

        The possibility of Zephyr Autos facing an action for wrongful dismissal in the circumstances seen above leads us to the issues of dismissal. At common law termination of an employment contract by the employer either with or without notice constitutes dismissal. The common law does not require a fair reason for the dismissal, only that the statutory requirements for notice are met. Whether a period of notice is required is decided on the reason for the dismissal, if the employee has committed a serious breach of  duty as in Ross v Aquascutum Ltd, gross misconduct as in Sinclair v Neighbour or a “refusal to obey a lawful and reasonable order and gross neglect.”. For dismissal other than instant or summary the minimum notice period required to be given is laid down by s.86 ERA 1996.   Where an employee has been dismissed without notice and without  justification, which qualifies as a repudiatory breach as in Industrial Rubber Products v Gillon, the employee may bring an action for wrongful dismissal. Unlike ordinary contract law where the remedies for breach of contract include the power of the court to impose specific performance or an injunction, when an action is  brought for wrongful dismissal these remedies are in the whole deemed impractical, the  explanation of such a view “being that the contract is of a personal nature, not amenable to enforcement.” As was said by Fry LJ in De Francesco v Barnum  “I should be very willing to extend decisions the effect of which is to compel persons  who are not desirous of maintaining continuous personal relations with one another. I think the courts are bound to be jealous lest they should turn contracts of service into contracts of slavery; and...I should lean against the extension of the doctrine of specific performance and injunction in such a manner.” This leaves the only practical remedy open to the court as an award of  damages, a wrongfully dismissed employee is entitled to damages equal to his wages or salary during his notice period, as for damages under other headings such as loss of reputation or stigma, the courts  are reluctant to agree to such awards as was seen in Addis V Gramophone Co Ltd, however an altering of this position came about in Malik v BCCI  SA where the employee could not obtain alternative employment due to the 'stigma' associated with his employment at BCCI.

        

        The most obvious distinction between cases of wrongful and unfair dismissal is that the former is decided in the civil courts and the later in a tribunal. In order for an employee to bring an action for unfair dismissal, they must first ensure they meet the qualifying criteria; they must be an employee, have been continuously employed for one year or more, not be employed by the police or armed forces, and be employed in Great Britain. The statutory protection afforded to an employee once they qualify to bring a case  is potentially a “more powerful way of challenging bad employer practices”. As we have shown an action brought for wrongful dismissal is based on the grounds of breach of contract, whereas an action for unfair dismissal gives the employee an opportunity to actually challenge the fairness of the decision to dismiss. Once the employee has proved that he was dismissed, the burden of proof passes to the employer, under s.98 ERA 1996, to show the reason for the dismissal and that it fell within one of the categories for fair dismissal, which are related to the ability or qualifications for the employee to do their work, misconduct on the part of the employee, retirement of the employee, redundancy, the employee could not continue to work without contravention of a legislative provision, or some other substantial reason. In  Abernathy v Mott, Hay and Anderson Cairns LJ said : “A reason for the dismissal of an employee is a set of facts known to the employer, or it may be of beliefs held by him, which cause him to dismiss the employee. If at the time of the dismissal the employer gives a reason for it, that is no doubt evidence, at any rate against him, as to the real reason, but it does not necessarily constitute the real reason. He may knowingly give a reason different from the real reason out of kindness or he may have difficulty proving the facts that actually led him to dismiss; or he may describe his reasons wrongly through some mistake of language or of law.”

In relation to the question posed, we need to examine the dismissal of Albert for the reason of redundancy, Denise's dismissal does not qualify as unfair dismissal as she fails to have the qualifying continuity.

        Although redundancy can be an automatic reason for a fair dismissal, the employer is obliged to follow the correct procedure. The three general requirements for this procedure are, that the employer must not select the employee unfairly, the employer should make reasonable efforts to look for alternative practicable employment either within the firm or the group to which the firm belongs, and that the employer should consult the employee and give him reasonable warning of impending redundancy. In Polkey the House of Lords held that a dismissal would  be unfair, even where an employer could show that; the decision to dismiss fell within the range of reasonable responses; and that although they did not follow fair and proper procedures, it would have made no difference to their decision to dismiss if they had done so, this decision ha now been partially reversed  by s.98A(2) ERA 1996 which states “failure by an employer to follow a procedure in relation to the dismissal of an employee shall not be regarded for the purposes of section 98(4)(a) as by making the employer's action unreasonable if he shows that he would have decided the employee if he had followed procedure.” The remedies available in a case of unfair dismissal are much broader than the award of damages in wrongful dismissal, the remedies are set out in s.111 to s.132 ERA 1996 and include the right of reinstatement or re-engagement, right to compensation, and the right to interim relief.

        

        In relation to Albert's circumstance of the discontinuance of  the discretionary bonus,  Zephyr Autos are not  under an implied duty to pay the bonus if their discretion is used in a bona fide and rational way. Albert's inability to reach his sales targets for the previous six months, would constitute a rational explanation for the cancellation of his bonus and would be viewed as a form of disciplinary incentive for him to reach his target in the future. This however will not be the case as Albert has also been informed that he has been selected for redundancy, the manner of how Albert has been informed of his redundancy, fails to meet the general requirements of procedure, he has not been given reasonable warning of his selection, has not been informed as to the reason for his selection and no effort has been made to find him other suitable employment within the company or the parent group which is inferred as Barry is under instruction from Head Office. The result of these facts is that Zephyr Autos may face a challenge of unfair dismissal from Albert for failure to follow the recognised procedure when performing a dismissal by redundancy, however they will have a defence in s.98(4)(a) if they can show that a man with  Albert's skills and qualities could not have filled a vacancy anywhere else within the group. Albert may also claim that he could rely on the “LIFO” clause in the original collective agreement, but as we have seen already in Alexander v Standard Telephones, that such clauses in collective agreements are not appropriate for incorporation in employment contracts.  A parallel example of Albert's case would be Young v Canadian Northern Rly Co, where the Privy Council held for the employer, refusing to incorporate the seniority clause from a collective agreement.

        The dismissal of Denise for gross misconduct, is characterised by the fact that the employer failed to follow the statutory  dismissal and disciplinary procedures given in the Employment Act 2002, Sch 2, Part 1. Failure to follow the procedure can  set up a breach of contract claim however, “the case of Scott-Davies v Redgate Medical Services makes it clear that there is no free standing right to claim a breach of the statutory procedures if the employee does not have the necessary continuity to claim unfair dismissal. This being said Denise could still bring an action for wrongful dismissal, and claim a repudiatory breach for not receiving the required notice period. In order to survive a claim for breach Zephyr Autos would have to show that they had fair and reasonable grounds for the gross misconduct.

        The legal issues Barry now faces as the Managing Director of Zephyr Auto's are as follows. In relation to the reduction of pay ZA could face unfair dismissal claims on the grounds of constructive dismissal, unless he provides a statement not later than one month after the change. In the event that any of the employees refuse to accept the change, Barry would then have the option to dismiss and pay the required statutory notice period.  As we have shown the dismissal of Albert on grounds of redundancy, which has a possibility of a claim for unfair dismissal, Barry would be advised to draft a clear document stating the reason for Albert's selection and his unsuitability for employment elsewhere in the group. Barry is legally obliged to pay Albert the statutory redundancy payment under s. 135 ERA 1996. The dismissal of Denise however raises fewer legal issues as she does not have the qualifying minimum of continuity in order to receive the benefit of statutory protection, in order to counter a claim of wrongful dismissal for gross misconduct, Barry would be advised to gather all evidence against Denise, in order to substantiate his claim of her misconduct.

                                                                                                                                                                                                                                                                          

 

         

Bibliography

Smith & Woods , Employment Law 9th edition, Oxford University Press

Employment Law 6th Edition, by Deborah J Lockton, Palgrave Macmillan Law Masters

Law Express Employment Law, by David Cabrelli, revised edition 2009, Pearson Longman

Employment Law LL2132 Module guide by Michael Wynn and Gwyneth Pitt

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