Damages for Wrongful Dismissal

The Supreme Court has ruled (Edwards v Chesterfield Royal Hospital NHS Foundation Trust) that a consultant surgeon who suffered a loss as a result of findings of personal and professional misconduct made against him in disciplinary proceedings that were conducted in breach of his employment contract cannot seek to recover damages in the ordinary courts for loss suffered as a result of the breach.

Michael Edwards was dismissed for gross professional and personal misconduct following a disciplinary hearing regarding allegations made against him by a patient. His contract of employment contained a clause to the effect that matters of professional misconduct or incompetence would be dealt with under a procedure negotiated and agreed by the Local Negotiation Committee. He contended that the General Medical Council had investigated and dismissed the allegations made against him and had his employer followed the correct disciplinary procedure as laid down in his contract of employment, it too would have exonerated him.

Mr Edwards brought a claim of unfair dismissal to the Employment Tribunal (ET). He then changed his mind and withdrew the claim, deciding instead to pursue a claim through the courts for losses arising from a breach of contract. He was seeking more than £4 million in damages for loss of past and future earnings because he claimed his employer’s actions had ruined his career.

The Court of Appeal had found that the law does not preclude an action for unlimited damages for breach of an express contractual obligation such as the agreed disciplinary procedure in this case. However, in a majority decision the Supreme Court held that dismissal damages could only be recovered where the loss could be said to precede and be independent of any subsequent dismissal. No separate contractual claim is available where the breach of contract relates to the manner of the employee’s dismissal, as was the case here. Unless the employment contract expressly contains agreement to the contrary, the remedy for wrongful dismissal as a result of a breach of disciplinary procedures lies in a claim to the Employment Tribunal under the provisions of the Employment Rights Act 1996. In the Court’s opinion, Parliament could not have intended that where disciplinary procedures have contractual status, any breach could give rise to a common law claim for damages.

This decision will come as a relief to employers as claims that the manner in which a dismissal was carried out was unfair will be dealt with by the ET where the maximum compensation award for unfair dismissal is limited to the statutory cap of £72,300.