Edwards v Chesterfield – unfair dismissal and damages for breach of contract

The facts in Edwards v Chesterfield Royal Hospital NHS Foundation Trust

This case encapsulated two appeals to the Supreme Court – Edwards (“the Respondent”)  v Chesterfield Royal Hospital NHS Foundation Trust (“the Appellant”) and Botham (FC) v Ministry of Defence. Both employees had been dismissed by their respective employers for the reason of gross misconduct. Both Edwards and Botham had clauses in their contracts of employment stipulating that a certain procedure should be carried out in disciplinary proceedings. In both cases the stipulated disciplinary procedure was deviated from and both employees were dismissed. The contention of the two Claimants at the Employment Tribunal was that they would not have been dismissed but for their employers’ failure to implement the agreed-upon disciplinary procedure. Botham succeeded in the Employment Tribunal in his claim for unfair dismissal but issued in the High Court for breach of contract. Edwards also issued a claim for breach of contract (among other claims) for breach of contract.

The law relating to unfair dismissal and breach of contract

The general principle in contract law is that the purpose of damages is to put the innocent party in the position that they would have been in but for the breach of contract. Thus, if an employer terminates a contract without notice and does so in breach of contract, the employee may have a claim for breach of contract. This would be a claim for wrongful dismissal. Damages for the wrongful dismissal (in a case where an employee is, for example, dismissed for gross misconduct) would amount to the number of weeks that the employee should have served in notice but was denied. If an employer fails to follow a contractual disciplinary procedure then damages are limited to the period of time it would have taken for the employer to put the contractual procedure into effect and be concluded.

However, no damages may be awarded for the manner in which the employee is dismissed. Unfairness, in particular, in the manner of dismissal does not give rise to a common law action for breach of contract (Johnson v Unisys). Employees have traditionally therefore been unable to claim damages for breach of contract that (they contended) resulted in their dismissal (and damages). This rule was challenged again in Edwards v Chesterfield Royal Hospital NHS Foundation Trust.

The Supreme Court’s judgment in Edwards v Chesterfield Royal Hospital NHS Foundation Trust

The Supreme Court allowed the appeal of the Appellant and reasserted the Johnson v Unisys test ­– that employees cannot recover damages for loss suffered from breach of terms of their contract of employment if that breach of contract relates to their dismissal. Remedy for the manner of dismissal is only available through pursuit of a statutory claim of unfair dismissal under the Employment Rights Act 1996, not through a common law action.

Our thoughts on Edwards v Chesterfield Royal Hospital NHS Foundation Trust

Although this result may seem a little unfair on employees who have been unfairly dismissed because of an alleged failure to follow a contractual disciplinary procedure, the decision of the Supreme Court is not unreasonable. If a particular remedy is made available to employees by Parliament for unfair dismissal (through the Employment Rights Act 1996), employees cannot circumvent these provisions by pursuing a common law claim for breach of contract.