Court of Appeal uncaps wrongful dismissal compensation levels

A dismissal dispute between a surgeon and his hospital could pave the way for multi-million pound compensation claims as prior limitations are overturned.

Ryan Solicitors, representing orthopaedic surgeon Michael Edwards, has won an appeal in which it claimed that the compensation for breach of disciplinary procedure should not be capped at notice-period earnings, as traditionally held.

In Edwards v Chesterfield Royal Hospital [2009] EWHC 2011 (QB), the Court of Appeal upheld the surgeon's claim that when an employer breaches contractual disciplinary procedure the worker is entitled to make compensation claims under general law if he wins his case.

Martin Warren, partner at Eversheds, said: "This case is of enormous significance for employers, particularly in cases involving higher earners, as it dramatically increases the amount of compensation potentially available to individuals who have been wrongfully dismissed.

'Although it is well established that such damages will usually be limited to the amount the employee would have earned during their notice period, the courts can also award compensation if the employer has a contractually binding disciplinary process which it has failed to follow. Past cases have limited that compensation to lost earnings over the time it would have taken the employer to go through the procedure properly, which could add just a few days or weeks worth of pay to the overall claim. But Mr Edwards has successfully challenged this approach.

'Working, as Mr Edwards did, as a professional in the health sector, allegations of serious misconduct can have career-ending consequences for the employee and, on the basis of today's decision, could result in huge losses of earnings."

"Employers need to take real care when drafting contracts and staff handbooks to avoid inadvertently conferring contractual status on disciplinary policies."

The case offers Mr Edwards leave to launch a full £4m compensation case alleging that if proper disciplinary procedure had been followed, he would not have been dismissed.

The Court of Appeal stressed that although an employee is entitled in law to claim damages, Mr Edwards will still have to prove a breach of his contract and that his loss was caused by his employer's alleged failure to comply with the disciplinary procedure.