Jersey: When Does The Termination Of A Contract Amount To A Wrongful Dismissal?

Last Updated: 7 June 2012
Article by Colette Hunt

It is perhaps not surprising, in the current economic times, that wrongful dismissal has been an issue considered by the Jersey Employment Tribunal on several occasions recently.

Wrongful dismissal claims are not new in Jersey. Prior to the introduction of the Employment (Jersey) Law 2003 these were brought before either the Royal Court or the Petty Debts Court, depending on the sum in dispute. Since the Tribunal has existed, it has had the power to deal with such a claim and since its remit is limited to a claim of less than £10,000, it means these are no longer pursued in the Petty Debts Court.

So, provided an employee is claiming £10,000 or less for sums due under the contract, they can lodge a JET1 with the Tribunal that includes a claim for wrongful dismissal either as a stand-alone claim, or as well as alleging unfair dismissal.

Two recent decisions are worthy of comment as they demonstrate the range of issues that can arise or be in dispute in wrongful dismissal cases. The first may be of interest to any employee who has an enhanced redundancy package and the second has a wider application as it provides guidance on how the damages will be valued or calculated in such a case.

The first involved a senior employee at the States of Jersey. He had worked there for many years and was happy to continue but in 2006, was offered a secondment to another position on certain terms. He was never issued with another contract and when the seconded post was subsequently discontinued, he was redeployed but, ultimately, made compulsorily redundant from that redeployed role.

He had accepted the secondment based on terms set out in a letter which included the assurance that "on completion of this period of secondment, a permanent position, which will reflect your skills and competencies, will be made available to you within the States with remuneration no less than your current grade". This wording proved crucial in his case. The employee had certainly relied on it and the Tribunal found that his contract of employment was in fact amended by way of agreement of the terms set out in that letter.

The employee submitted claims for both unfair and wrongful dismissal. There were two separate contested hearings before two differently constituted Tribunal panels (presumably to ensure fairness). The first in July 2011 found that he was unfairly dismissed and awarded him the maximum 26 weeks' pay, but this was reduced by 100% because he had already received a redundancy payment in excess of this award.

As the employee was entitled to a generously enhanced redundancy payment, the set-off applied by the Tribunal meant it was, in effect, pointless for him to bring his claim for unfair dismissal, but understandable why he did. In many instances, the employee would not be entitled to such a large redundancy payment.

At the start of its judgment on wrongful dismissal, the Tribunal emphasised the difference between claims for unfair and wrongful dismissal. The former came into existence under the law and is defined by that law, and the latter is in breach of the terms of the contract between the employer and the employee. The breach can be express or implied, or both.

The Tribunal also emphasised that an unfair dismissal may not be a wrongful dismissal and vice versa. Thus the fact that an employee is found to have been unfairly dismissed does not affect whether they were also wrongfully dismissed, as proved to be the case on the facts of this employee's termination.

Both types of claim can arise following an actual dismissal or a constructive dismissal.

This employee's claim for wrongful dismissal failed because his redundancy, described as a compulsory redundancy, was with his consent. It was financially advantageous for him to agree to this rather than accept voluntarily redundancy. This proved to be a significant point.

In July 2011, the first Tribunal panel had found unequivocally that he had wished to take the compulsory redundancy package. He had understood the amount being offered to him and decided to accept this. He had been advised that he could appeal against being made compulsorily redundant, but did not.

The second judgment involved a Facilities and HR officer at a financial services company. He resigned with immediate effect after he did not consider he had been sufficiently supported in a number of matters. He lodged a complaint for constructive unfair dismissal and claimed other sums including notice pay equal to his three months' contractual notice payable under the contract and in respect of holiday pay during the notice period.

Interestingly, the employer denied that he was constructively unfairly dismissed but made a commercial decision by admitting that he was unfairly dismissed to avoid the cost of a lengthy contested hearing.

Following the admission, the parties agreed that the compensation award amounted to £5,692.40 but as the employer sought a reduction of this award on the basis that because the employee had got another job immediately after resigning, he had suffered no, or little, loss. A second Tribunal had to consider whether this should be "just and equitable" to take into account.

The second Tribunal panel confirmed that the purpose of an "award" for unfair dismissal was to compensate the employee rather than penalise the employer.

As the Tribunal did not have the opportunity to hear about the employee's time with the firm because the employer had admitted liability, it did not know the facts of the case to be able to apply them. It concluded that on the face of the firm's admission it appeared that he had been entirely justified to resign because of the employer's failure to abide by the terms of his contract.

Faced with the prospect of being unemployed, the Tribunal found it was entirely reasonable for him to look for and secure alternative work as soon as he could. It concluded that if it were to reduce his unfair dismissal award for doing so, this would in effect be punishing him for being focused and organised, and in turn would be unduly rewarding the employer. Thus the employer's application to reduce the award on the basis that the employee's actual financial loss was minimal, was dismissed.

In respect of the claim for wrongful dismissal, the Tribunal gave a lengthy decision but the following are the key points:

  • the company should have given the employee the 3 months' notice in accordance with the terms of the contract;
  • it was not possible in this case for the employee to work his notice period as he had resigned;
  • as the contract contained a "payment in lieu of notice" clause, it was possible for the employer to make him a financial payment in lieu of notice, but it chose not to;
  • losses incurred by the employee in such cases are deemed to be damages (as opposed to compensation) and as such, the usual rules and principles of common law apply. The Tribunal considered various wrongful dismissal decisions of the Royal Court in Jersey both prior to and since the law took effect; in particular on the issue of the duty of the employee to mitigate its loss;
  • as the employee had secured suitable alternative employment within a few weeks of resigning, he had satisfied his obligation in respect of his duty to mitigate;
  • as there is no rule of law which limits damages in such cases to loss of pay and benefits resulting from not being provided with notice, all other entitlements can be claimed by the employee for the duration of the notice period, a monetary value given to each and then this will be taken into account when assessing the amount of damages. In his JET1, the employee had claimed for loss of private health insurance, permanent health insurance, travel insurance and life insurance although the monetary value had not been calculated (it would be advisable to quantify all such amounts in advance of any contested hearing and try to agree these with the other party);
  • accordingly, the actual amount that the employee earned with the new employer was set off against the value of the pay and benefits that he would have received if he worked out his notice with the employer or had been paid in lieu of the notice period;

Finally, the employee claimed a modest amount for the holiday pay that would accrue during the contractual notice period. This was because he had resigned. The Tribunal found that after the date of his resignation, he was not obliged to provide any services for the firm and so it could not be said that he had "earned" the right to accrue annual leave.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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