The Judicial Committee of the Privy Council (JCPC) is the highest court of appeal for a number of Commonwealth countries, UK overseas territories and crown dependencies (including the Isle of Man). Very recently, it issued a judgment which considered the claim of an employee dismissed in breach of contract and the extent to which his terms of employment created an independent right to damages for the manner of such dismissal. The JCPC decided, following consideration, that they did not.
The individual in this case had worked for his employer for approximately 30 years when his employment was terminated, with the employer electing to make a payment in lieu of notice (PILON) equivalent to statutory minimum. The amount of the PILON was disputed based on the contract terms which provided for a more generous payment in such circumstances. However, whilst the notice pay was part of the reason the case was appealed and later referred to the JCPC, an interesting point arose regarding the construction of the contract and whether it gave rise to an additional complaint the individual could pursue for being terminated “unjustly”.
The contract of employment in this case incorporated standard terms agreed with a union (Industrial Agreement). Article 14 of the Industrial Agreement not only provided that employment could be terminated by giving reasonable notice or making a PILON, but it included an express statement that “the Corporation shall not…terminate an employee unjustly”. The employee contended that, besides breaching his contract in regard to the amount of the PILON, the employer had failed to give a reason for his dismissal, or follow any process, which meant that his termination was “unjust”.
The JCPC dismissed the argument for a stand-alone claim based on an asserted contract term that the employer would not dismiss “unjustly”. In doing so, it noted the availability under relevant law of both remedies for wrongful and statutory unfair dismissal (the latter of which the employee did not include in his complaint). It also said that to allow an interpretation of the contract which created an additional legal basis of claim was inconsistent with the common law right of the employer to terminate the contract on notice – whether for a good or bad reason or no reason at all.
Importantly, the JCPC noted that to interpret the contract in the way the employee proposed would create “chaos and confusion” if its effect was to supplement or override the statutory regime relating to unfair dismissal.
This JCPC decision is in line with the general principle that an employee will not be entitled at common law to recover losses attributable to the way in which a dismissal is carried out (also known as the “Johnson exclusion area”[1]). Although Johnson was a case about breach of the implied duty of trust and confidence, Edwards and Chesterfield Royal Hospital Foundation Trust[2] held[3] that the Johnson exclusion area also applies to breaches of express terms. Whilst this area of law gets into nuances relating to breaches antecedent to dismissal versus those relating to the dismissal itself, it was not necessary for the JCPC to consider since it concluded that there was no separate contractual “right” to be breached in the first place.
Dean v Bahamas Power & Light reinforces the conceptually and legally distinct regimes that are potentially open to a claimant to argue on termination of their employment – ie wrongful dismissal (for which damages will usually only extend to notice pay) and statutory unfair dismissal. The case should not, however, detract from employers’ care to carry out a fair procedure in effecting dismissals, both as a matter of good practice and in case the employee involved asserts a statutory claim for unfair dismissal.
References:
[1] See also Addis v Gramophone Co Ltd [1909] AC 488
[2] Combined reference to the Supreme Court with Botham v Ministry of Defence [2011] UKSC 58
[3] With dissenting views – see, in particular, that of Lady Hale.
