By Stephanie Paterson, assistant solicitor at Bevan Ashford
Q Could employees avoid the one year service requirement for unfair
dismissal by bringing ‘loss of chance’ claims?
A In 1999, in Raspin v United New Shops Ltd, the Employment Appeals
Tribunal (EAT) gave employees who were not eligible to claim unfair dismissal
the opportunity to pursue ‘loss of chance’ claims.
The EAT held in Raspin that where an employee is dismissed without notice
and in breach of a contractual disciplinary procedure, if the employee would
have otherwise accrued one year’s service and therefore qualified to claim
unfair dismissal, then in addition to claiming the notice monies owed, the
employee could also claim damages for the loss of the chance to claim unfair
dismissal.
This would potentially increase compensation for wrongful dismissal
significantly, as damages could include the equivalent to the compensation that
may have been awarded if the employee had been able to acquire one year’s
service and claim unfair dismissal.
Most employees have to be employed for one year before they qualify to claim
unfair dismissal. However, the Raspin decision meant it was extremely risky to
dismiss employees without giving proper notice under their contract, where they
were close to accruing one year’s service.
Q How has this now changed?
A In Virgin Net Ltd v Harper, the EAT reviewed a tribunal’s decision
regarding an employee who had been dismissed without notice. Had she received
her contractual notice, she would have acquired one year’s service and
qualified to bring a claim for unfair dismissal. Together with her wrongful
dismissal claim, she sought to recover damages for the loss of the right to
claim unfair dismissal, relying on Raspin.
In the first instance, the tribunal awarded the employee £25,000 – the
maximum payable for a breach of contract claim. Of this, £9,514 represented
three months’ notice pay, and the remainder represented what the tribunal considered
the employee would have been awarded if she been able to claim unfair
dismissal. The loss of a chance to claim increased the employee’s compensation
significantly.
Virgin Net appealed to the EAT. In its decision, the EAT referred to a
decision of the House of Lords dating back to 1909 (Addis v Gramophone Co Ltd),
which stated that damages for wrongful dismissal should be limited to the
earnings the employee would have received during the notice period.
The EAT also considered modern case law and specifically Johnson v Unisys
Ltd, which supported the principle that employees should not be able to
circumvent the restrictions set by Parliament on claiming unfair dismissal.
In other words, legislation clearly states that employees have to be employed
for at least one year (subject to certain exceptions) before they can bring a
claim for unfair dismissal, and that as this was the intention of Parliament,
this should be followed. The EAT followed this principle and overturned the
tribunal’s decision.
Q Will this change how employers deal with dismissals?
A Employers should still ensure they comply with the statutory notice
requirements when dismissing an employee who is approaching one year’s service
(and considering whether any of the exceptions to the one year rule apply).
The Employment Rights Act 1996 states that where an employee is dismissed
without receiving their statutory notice entitlement (one week for each year of
service up to a maximum of 12 weeks), the effective date of dismissal will be
the date on which that notice would expire (except in cases of gross
misconduct). This will apply for the purpose of assessing whether the employee
has acquired one year’s service.
This means that where an employee is dismissed without notice less than one
week before acquiring one year’s service, the effective date of dismissal will
be brought forward by the statutory notice period – ie, one week. That employee
would therefore be eligible to claim unfair dismissal.
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The Virgin Net case is, however, good news for employers. Provided an
employer has taken the statutory notice period into account when deciding
whether to dismiss an employee who is approaching the one-year mark, employees
cannot now enhance their wrongful dismissal claim by referring to the loss of a
chance to claim unfair dismissal caused by the employer’s failure to give
proper contractual notice.
Subject to any further appeal in the Virgin Net case, employers should now
feel reassured that at worst, claims for wrongful dismissal would result in
payment of the employee’s salary and benefits during the notice period.
