No Damages for Breach of Contractual Disciplinary Procedure

Employees cannot claim damages for breach of a contractual disciplinary procedure which results in their dismissal. Compensation for the unfair way in which they have been dismissed can only be recovered through an unfair dismissal claim in the employment tribunal. 

In the cases of Edwards v Chesterfield Royal Hospital Foundation Trust and Botham v Ministry of Defence, employees sought to argue that breaches of a contractual disciplinary procedure led to them being found guilty of misconduct. Had the breaches not occurred they would not have been found guilty, would not have been dismissed and would not have suffered damage to their reputation making it difficult for them to find another job. They both claimed substantial damages for future loss of earnings. 

The Court of Appeal in the Edwards case accepted that an employee could in principle recover damages for loss of future employment prospects in such circumstances. The High Court in the Botham case disagreed but his appeal to the Court of Appeal was successful in view of its earlier decision in Botham and both cases proceeded on appeal to the Supreme Court. 

The Supreme Court held that unless parties to an employment contract expressly agree otherwise, a failure to comply with a contractually binding disciplinary procedure which results in dismissal does not give rise to a common law claim for damages (beyond existing principles). Damages for breach of contract were limited to losses for the notice period (and any additional period the employee would have been employed for had the disciplinary procedure been followed correctly). Compensation for the unfair manner of dismissal could only be recovered through a statutory claim for unfair dismissal. Parliament has put strict limits on what can be recovered in an unfair dismissal claim (including a cap on the amount of compensation) and a breach of contract claim cannot be used to get round these. 

This is good news for employers as it makes it clear that an employer’s liability for breach of a contractual disciplinary procedure which results in an employee’s dismissal is limited. An employee can only recover damages for the notice period, for any additional period the employee would have been employed had the disciplinary procedure been followed correctly and compensation for unfair dismissal, currently capped at £68,400. Although contractual disciplinary procedures are more common in the public sector than in the private sector, even in the private sector disputes will sometimes arise over the status of a disciplinary procedure. This case will therefore be reassuring for all employers. 

It should be noted that where an employee acquires a right of action before dismissal which is separate from and independent of the act of dismissal, that action and a common law claim for damages for breach of contract can still be brought. However, it would be unusual for an employee to suffer a loss arising from pre-dismissal conduct, as opposed to from the dismissal itself.