Edwards v Chesterfield Royal Hospital Foundation Trust; Botham v Ministry of Defence [2011] UKSC 58
In this case, claims by employees that they were entitled to common law damages for breaches by their employer of contractual disciplinary procedures failed. The Supreme Court held that the principal remedy in such cases was provided by a statutory claim of unfair dismissal. The only basis for a separate claim was:
- if pre-dismissal breaches that were separate from the dismissal had resulted in damage, such as damage to reputation – such claims are exceptions from the so-called “Johnson exclusion area” established in earlier case law; or
- if a contractual dismissal or disciplinary procedure had not been followed, for damages in respect of salary and contractual entitlements during the period it would have taken properly to complete the procedure – this is the so-called “Gunton extension”, also established in earlier case law.
The result is that employees will quickly hit the statutory cap on compensation for unfair dismissal in cases where so called “stigma” damages are claimed for career long loss. The doctrine has been tested over time mainly by employees looking for a way to avoid the statutory cap by instead bringing a breach of contract claim for damages in the courts.
The Supreme Court (by a majority rather than unanimously) rejected the employees’ argument that breaches of a contractual disciplinary procedure should give rise to a claim for damages that was separate from a claim for unfair dismissal or a “Gunton” type claim. It held that the alleged breaches of the contractual disciplinary procedures in this case were not sufficiently separate from the dismissal so as to give rise to a separate claim.
Implications
This case provides helpful clarification for employers as to the limits of an employee’s ability to claim common law damages for breach of contract in order to gain greater compensation for their dismissal.
The “Johnson exclusion area” survives, in principle at least, but only the most exceptional of cases will fall outside it and give rise to a damages claim in addition to an unfair dismissal claim.
However, the strongly divergent opinions of the Supreme Court judges in this case suggest that there may still be scope for further case law on the subject.
For further information on this article please contact Adam Williams adam.williams@dmhstallard.com or T: 020 7822 1587
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