Supreme Court rules that contractual damages cannot be recovered for manner of dismissal losses
In an important decision, the Supreme Court has ruled that an employee cannot bring a breach of contract claim for losses flowing from the manner of dismissal even where the dismissal is in breach of an express contractual disciplinary procedure. The statutory unfair dismissal regime provides for compensation in these circumstances, and the ordinary principles that govern breach-of-contract damages do not apply. Contractual damages can only be recovered where the breach precedes and is independent of the dismissal process (Edwards v Chesterfield Royal Hospital NHS Foundation Trust; Botham v Ministry of Defence).
When an employer breaches an employment contract, ordinarily, like with any other contract, the employee can recover damages for losses flowing from that breach. However, in the leading case of Johnson v Unisys, the House of Lords said that contractual claims for breach of the implied term of trust and confidence in the manner of dismissal cannot be brought as Parliament has already provided a statutory remedy for unfair dismissal. This exception from normal breach-of-contract principles has become known as the Johnson exclusion area.
Claims for contractual damages relating to breaches that are separate to and independent of the dismissal, such as an act of suspension, fall outside the Johnson exclusion area, and can be brought. This distinction can lead to arguments as to whether or not the particular breach is connected to or independent of the dismissal…
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