The Court of Appeal has offered a decision that could result in a substantial increase in compensation payouts for dismissed employees when an employer has failed to follow its disciplinary or capability procedures.
In the case of Edwards v Chesterfield Royal Hospital NHS Foundation Trust, Michael Edwards, a Consultant Trauma and Orthopaedic Surgeon, is claiming that the Trust failed to follow its own contractually binding disciplinary procedure before dismissing him. Mr Edwards was dismissed for gross professional and personal misconduct after a disciplinary hearing over allegations made against him by a patient. He alleges that if the proper procedure had been followed he would not have been dismissed. Mr Edwards is claiming more than £4m compensation to reflect the earnings he says he has lost since being dismissed.
The Trust argued in the Court of Appeal that, even if it had failed to follow the correct procedure (which the Trust denies), long-held legal principles mean damages should be capped at the amount he would have earned during his three-month notice period.
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This week, however, the Court of Appeal rejected the Trust’s argument and ruled that Mr Edwards’ compensation need not be limited to his three months’ notice pay.
Martin Warren, Partner at law firm, 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.
“Employment tribunals can award compensation for unfair dismissal, but the amount available is currently capped at £65,300 in most cases. In the case of higher paid employees this often falls far short of their actual lost earnings, particularly when pension loss is taken into account.
“Some employees, like Mr Edwards, try to get around the restriction by making a separate claim for damages for breach of contract. 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, the Court of Appeal accepting that the level of damages for breach of contract should reflect the chance that if the proper procedure had been followed the disciplinary proceedings would have been decided in his favour and he would have kept his job. 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.
“The need to take care is reinforced by another case decided recently by the Court of Appeal, Mezey v. South West London & St George’s Mental Health NHS Trust. That case shows that, if an employee moves quickly enough, they might be able to obtain an injunction to prevent a disciplinary action being taken if there are good grounds for believing that the employer has failed to follow a contractually binding disciplinary procedure.”
