Wrongful dismissal – What is it? The things you need to know:

Wrongful dismissal is a dismissal in breach of contract, it is not a statutory claim. Fairness is not an issue: the sole question is whether the terms of the contract, which can be express or implied, have been breached. The employee will have a claim in damages if the employer, in dismissing them, breached the contract and caused them loss. A wrongful dismissal claim may arise out of an actual or constructive dismissal.

Types of wrongful dismissal claim

The following types of breach of contract are often involved in claims for wrongful dismissal:

• Breach of a notice term, whether express or implied.
• Termination of a fixed-term contract or a "specific task" contract before its expiry.
• Breach of a contractual disciplinary or redundancy procedure.

The most common type of claim is for breach of the notice period.

Inadequate notice

There are three ways in which the notice period may be arrived at:

• By statute.
• By an express term in the contract.
• By an implied term of the contract.

When the employer may be entitled to dismiss without notice

An employer may be entitled to dismiss an employee without notice where the employment contract contains a payment in lieu of notice (PILON) clause or where the employee has committed a repudiatory breach of their employment contract.

Where there is a PILON?

If an employment contract contains a non-discretionary payment in lieu of notice (PILON) clause (that is, a clause stating that if the employer terminates the contract with insufficient notice then the employee will receive a PILON), any dismissal without adequate notice will not be wrongful, even if the employer does not actually make the PILON.

In these circumstances, the contract has been lawfully terminated by the employer and the employee must claim for a liquidated sum under the contract (in other words, they will have to bring a debt claim) instead of bringing a wrongful dismissal claim.

Employee commits repudiatory breach

Dismissing an employee without notice may be justified where the employee has committed a repudiatory breach of contract. An employer has a choice whether to accept the repudiatory breach or whether to affirm the contract (as does the employee in cases where the employer is in breach. Where the employer decides to terminate the contract then they have accepted the repudiatory breach by the employee.

Remedies:

The purpose of damages is to put the employee in the position they would have been if the contract had not been breached. Therefore, damages will reflect the net value of salary and any other contractual benefits to which the employee would have been entitled had they been allowed to work out their notice.

Where there is no contractual entitlement to a specified notice period, a reasonable notice period will be implied.

Damages for wrongful dismissal in the employment tribunal are capped at a maximum of £25,000.  If a breach of contract claim is brought in an employment tribunal, compensation can be increased or decreased by up to 25% to reflect a party’s compliance with the Acas Code of Practice on disciplinary and grievance procedures.