Employers 'hugely reassured' by unfair dismissal ruling

Employers subject to contractual disciplinary procedures will be 'hugely reassured' by a Supreme Court decision restricting common law unfair dismissal claims, Martin Warren, head of employment law at Eversheds, has said.

'More widely, however, the conclusions will come as a relief to all employers who are not certain as to the contractual status of their disciplinary procedures or who are facing allegations that a procedure has not been applied correctly.'

However, Warren said employers could not afford to be complacent, particularly in sectors such as health and financial services, where question marks over honesty and integrity could damage future employment opportunities, and it was important that procedures are followed, whether or not they were contractual.

'This decision does not, for example, protect employers who are lax over the application of contractual disciplinary procedures from expensive litigation and reputational damage in the form of injunctions.'

Robert Riley, partner at Addleshaw Goddard, said the threat of potentially unlimited common law claims had been used by claimants as a negotiating tactic.

He said the Supreme Court ruling would help employers by bringing certainty to the scope of the exclusion from the normal rules for unfair dismissal cases.

Delivering judgment in Edwards v Chesterfield Royal Hospital NHS Foundation Trust [2011] UKSC 58, Lord Dyson said that when parliament introduced our unfair dismissal laws 40 years ago it 'could not have intended that the inclusion of these provisions in a contract would also give rise to a claim for damages'.

He went on: 'The unfair dismissal legislation precludes a claim for damages for breach of contract in relation to the manner of a dismissal, whether the claim is formulated as a claim for breach of an implied term or as a claim for breach of an express term which regulates disciplinary procedures leading to a dismissal.'

He said a dismissal could be unfair for a variety of reasons, not just because agreed procedures were not followed, but complaints were intended to be adjudicated by specialist employment tribunals.

Lord Dyson allowed the appeals. Lord Walker agreed, together with Lord Phillips and Lord Mance, for their own reasons. Lady Hale dissented in both cases, while Lord Kerr and Lord Wilson would have rejected the appeal in Edwards but allowed it in a further case, Botham.