| Johnson v Unisys Ltd | |
|---|---|
 | |
| Court | House of Lords |
| Decided | March 22, 2001 |
| Citation(s) | [2001] UKHL 13, [2001] IRLR 279 |
| Keywords | |
| Unfair dismissal, injury to feelings, compensation, contract of employment | |
Johnson v Unisys Limited [2001] UKHL 13 is a leading UK labour law case on the measure of damages for unfair dismissal and the nature of the contract of employment. [1]
After twenty years of working for Unisys Ltd in Milton Keynes, in 1994 Mr Johnson was dismissed for an alleged irregularity in his work. He suffered a mental breakdown, drank heavily, was admitted to mental hospital, could not find a new job despite over 100 applications and at age 52 was unlikely to have a promising future career. He claimed that he was wrongly dismissed, and that the manner of his dismissal, which was summarily without the chance of a fair hearing and with one month's pay in lieu only, caused his health problems. He sought compensation for unfair dismissal, and in addition for the manner of dismissal given the employer's breach of mutual trust and confidence.
The House of Lords held that while Mr Johnson had been dismissed unfairly there could be no compensation for the manner of Mr Johnson's dismissal if that would exceed the statutory scheme laid out in the Employment Rights Act 1996 and the accompanying limits on compensation that could be sought through the system of employment tribunals. While a common law right to full compensation for breach of contract might exist, it could not circumvent the intention of Parliament in laying down limits to compensation for dismissals.
Lord Nicholls said the following.
2. [...] In principle the appellant's argument has much to commend it. I said so, in my obiter observations in Mahmud's case, at pages 39-40. But there is an insuperable obstacle: the intervention of Parliament in the unfair dismissal legislation. Having heard full argument on the point, I am persuaded that a common law right embracing the manner in which an employee is dismissed cannot satisfactorily coexist with the statutory right not to be unfairly dismissed. A newly developed common law right of this nature, covering the same ground as the statutory right, would fly in the face of the limits Parliament has already prescribed on matters such as the classes of employees who have the benefit of the statutory right, the amount of compensation payable and the short time limits for making claims. It would also defeat the intention of Parliament that claims of this nature should be decided by specialist tribunals, not the ordinary courts of law.
Lord Steyn, dissenting, argued the statutory remedies in salary for wrongful dismissal inadequate, and the statutory term of notice did not prevent developing an implied term of good faith and fair dealing. There was no conflict between the requirement of notice and not to exercise the power in a harsh, humiliating manner.
Lord Hoffmann made some important remarks on the contract of employment. [2]
35. My Lords, the first question is whether the implied term of trust and confidence upon which Mr Johnson relies, and about which in a general way there is no real dispute, or any of the other implied terms, applies to a dismissal. At common law, the contract of employment was regarded by the courts as a contract like any other. The parties were free to negotiate whatever terms they liked and no terms would be implied unless they satisfied the strict test of necessity applied to a commercial contract. Freedom of contract meant that the stronger party, usually the employer, was free to impose his terms upon the weaker. But over the last 30 years or so, the nature of the contract of employment has been transformed. It has been recognised that a person's employment is usually one of the most important things in his or her life. It gives not only a livelihood but an occupation, an identity and a sense of self-esteem. The law has changed to recognise this social reality. Most of the changes have been made by Parliament. The Employment Rights Act 1996 consolidates numerous statutes which have conferred rights upon employees. European law has made a substantial contribution. And the common law has adapted itself to the new attitudes, proceeding sometimes by analogy with statutory rights.
36. The contribution of the common law to the employment revolution has been by the evolution of implied terms in the contract of employment. The most far-reaching is the implied term of trust and confidence. But there have been others. For example, in W A Goold (Pearmak) Ltd v McConnell [1995] IRLR 516, Morison J (sitting in the Employment Appeal Tribunal) said that it was an implied term of the contract of employment that an employer would reasonably and promptly afford employees an opportunity to obtain redress of grievances. He inferred such a term from what is now section 3 of the Employment Rights Act 1996, which requires that an employee be provided with a written statement of the particulars of his employment, including a note of how he may apply if he has any grievances. So statute and common law have proceeded hand in hand.
37. The problem lies in extending or adapting any of these implied terms to dismissal. There are two reasons why dismissal presents special problems. The first is that any terms which the courts imply into a contract must be consistent with the express terms. Implied terms may supplement the express terms of the contract but cannot contradict them. Only Parliament may actually override what the parties have agreed. The second reason is that judges, in developing the law, must have regard to the policies expressed by Parliament in legislation. Employment law requires a balancing of the interests of employers and employees, with proper regard not only to the individual dignity and worth of the employees but also to the general economic interest. Subject to observance of fundamental human rights, the point at which this balance should be struck is a matter for democratic decision. The development of the common law by the judges plays a subsidiary role. Their traditional function is to adapt and modernise the common law. But such developments must be consistent with legislative policy as expressed in statutes. The courts may proceed in harmony with Parliament but there should be no discord.
[...]
42. My Lords, in the face of this express provision that Unisys was entitled to terminate Mr Johnson's employment on four weeks notice without any reason, I think it is very difficult to imply a term that the company should not do so except for some good cause and after giving him a reasonable opportunity to demonstrate that no such cause existed.
43. On the other hand, I do not say that there is nothing which, consistently with such an express term, judicial creativity could do to provide a remedy in a case like this. In Wallace v United Grain Growers Ltd (1997) 152 DLR (4th) 1, 44-48, McLachlin J (in a minority judgment) said that the courts could imply an obligation to exercise the power of dismissal in good faith. That did not mean that the employer could not dismiss without cause. The contract entitled him to do so. But in so doing, he should be honest with the employee and refrain from untruthful, unfair or insensitive conduct. He should recognise that an employee losing his or her job was exceptionally vulnerable and behave accordingly. For breach of this implied obligation, McLachlin J would have awarded the employee, who had been dismissed in brutal circumstances, damages for mental distress and loss of reputation and prestige.
44. My Lords, such an approach would in this country have to circumvent or overcome the obstacle of Addis v Gramophone Co Ltd [1909] AC 488, in which it was decided that an employee cannot recover damages for injured feelings, mental distress or damage to his reputation, arising out of the manner of his dismissal. Speaking for myself, I think that, if this task was one which I felt called upon to perform, I would be able to do so. In Mahmud v Bank of Credit and Commerce International SA [1998] AC 20, 51 Lord Steyn said that the true ratio of Addis's case was the damages were recoverable only for loss caused by a breach of contract, not for loss caused by the manner of its breach. As McLachlin J said in the passage I have quoted, the only loss caused by a wrongful dismissal flows from a failure to give proper notice or make payment in lieu. Therefore, if wrongful dismissal is the only cause of action, nothing can be recovered for mental distress or damage to reputation. On the other hand, if such damage is loss flowing from a breach of another implied term of the contract, Addis's case does not stand in the way. That is why in Mahmud's case itself, damages were recoverable for financial loss flowing from damage to reputation caused by a breach of the implied term of trust and confidence.
[...]
50. It follows, my Lords, that if there was no relevant legislation in this area, I would regard the question of whether judges should develop the law by implying a suitable term into the contract of employment as finely balanced. But now I must consider the statutory background against which your Lordships are invited to create such a cause of action.
[...]
56. Part X of the Employment Rights Act 1996 therefore gives a remedy for exactly the conduct of which Mr Johnson complains. But Parliament had restricted that remedy to a maximum of £11,000, whereas Mr Johnson wants to claim a good deal more. The question is whether the courts should develop the common law to give a parallel remedy which is not subject to any such limit.
57. My Lords, I do not think that it is a proper exercise of the judicial function of the House to take such a step. Judge Ansell, to whose unreserved judgment I would pay respectful tribute, went in my opinion to the heart of the matter when he said:
"there is not one hint in the authorities that the...tens of thousands of people that appear before the tribunals can have, as it were, a possible second bite in common law and I ask myself, if this is the situation, why on earth do we have this special statutory framework? What is the point of it if it can be circumvented in this way? .... it would mean that effectively the statutory limit on compensation for unfair dismissal would disappear."58. I can see no answer to these questions. For the judiciary to construct a general common law remedy for unfair circumstances attending dismissal would be to go contrary to the evident intention of Parliament that there should be such a remedy but that it should be limited in application and extent.
In employment law, constructive dismissal, also called constructive discharge or constructive termination, occurs when an employee resigns as a result of the employer creating a hostile work environment. Since the resignation was not truly voluntary, it is, in effect, a termination. For example, when an employer places extraordinary and unreasonable work demands on an employee to obtain their resignation, this can constitute a constructive dismissal.
In United Kingdom law, the concept of wrongful dismissal refers exclusively to dismissal contrary to the contract of employment, which effectively means premature termination, either due to insufficient notice or lack of grounds. Although wrongful dismissal is usually associated with lack of notice sometimes it can also be caused by arbitrary dismissal where no notice was required but certain grounds were specified in the contract as being the only ones available but none existed.
Unfair dismissal in the United Kingdom is the part of UK labour law that requires fair, just and reasonable treatment by employers in cases where a person's job could be terminated. The Employment Rights Act 1996 regulates this by saying that employees are entitled to a fair reason before being dismissed, based on their capability to do the job, their conduct, whether their position is economically redundant, on grounds of a statute, or some other substantial reason. It is automatically unfair for an employer to dismiss an employee, regardless of length of service, for becoming pregnant, or for having previously asserted certain specified employment rights. Otherwise, an employee must have worked for two years. This means an employer only terminates an employee's job lawfully if the employer follows a fair procedure, acts reasonably and has a fair reason.
Loss of chance in English law refers to a particular problem of causation, which arises in tort and contract. The law is invited to assess hypothetical outcomes, either affecting the claimant or a third party, where the defendant's breach of contract or of the duty of care for the purposes of negligence deprived the claimant of the opportunity to obtain a benefit and/or avoid a loss. For these purposes, the remedy of damages is normally intended to compensate for the claimant's loss of expectation. The general rule is that while a loss of chance is compensable when the chance was something promised on a contract it is not generally so in the law of tort, where most cases thus far have been concerned with medical negligence in the public health system.
A severance package is pay and benefits that employees may be entitled to receive when they leave employment at a company unwillfully. In addition to their remaining regular pay, it may include some of the following:
The Employment Rights Act 1996 is a United Kingdom Act of Parliament passed by the Conservative government to codify existing law on individual rights in UK labour law.
Wallace v United Grain Growers Ltd, 1997 CanLII 332, [1997] 3 SCR 701 is a leading decision of the Supreme Court of Canada in the area of Canadian employment law, particularly in determining damages arising from claims concerning wrongful dismissal.
English contract law is the body of law that regulates legally binding agreements in England and Wales. With its roots in the lex mercatoria and the activism of the judiciary during the industrial revolution, it shares a heritage with countries across the Commonwealth, from membership in the European Union, continuing membership in Unidroit, and to a lesser extent the United States. Any agreement that is enforceable in court is a contract. A contract is a voluntary obligation, contrasting to the duty to not violate others rights in tort or unjust enrichment. English law places a high value on ensuring people have truly consented to the deals that bind them in court, so long as they comply with statutory and human rights.
Addis v Gramophone Co Ltd [1909] AC 488 is an old English contract law and UK labour law case, which used to restrict damages for non-pecuniary losses for breach of contract.
Southern Foundries (1926) Ltd v Shirlaw [1940] AC 701 is an important English contract law and company law case. In the field of contracts it is well known for MacKinnon LJ's decision in the Court of Appeal, where he put forth the "officious bystander" formulation for determining what terms should be implied into agreements by the courts. In the field of company law, it is known primarily to stand for the principle that damages may be sought for breach of contract by a director even though a contract may de facto constrain the exercise of powers to sack people found in the company's constitution.
Malik and Mahmud v Bank of Credit and Commerce International SA [1997] UKHL 23 is a leading English contract law and UK labour law case, which confirmed the existence of the implied term of mutual trust and confidence in all contracts of employment.
Gisda Cyf v Barratt [2010] UKSC 41 is a UK labour law case, concerning unfair dismissal governed by the Employment Rights Act 1996.
Polkey v AE Dayton Services Ltd [1987] UKHL 8 is a UK labour law case, concerning unfair dismissal, now governed by the Employment Rights Act 1996.
Eastwood v Magnox Electric plc [2004] UKHL 35 is a UK labour law case concerning damages for wrongful dismissal, which were held to not be limited if a breach of contract occurs during the performance of the contract, rather than at the point of termination.
Murray v Minister of Defence is an important case in South African labour law. An appeal from a decision in the Cape Provincial Division by Yekiso J, it was heard in the Supreme Court of Appeal (SCA) on 18 February 2008. Mpati DP, Cameron JA, Mlambo JA, Combrinck JA and Cachalia JA presided, handing down judgment on 31 March. Counsel for the appellant was KPCO von Lieres und Wilkau SC ; NJ Treurnicht SC appeared for the respondent. The appellant's attorneys were Van der Spuy Attorneys, Cape Town, and Hill McHardy & Herbst Ing, Bloemfontein. The respondent was represented by the State Attorney, Cape Town, and the State Attorney, Bloemfontein.
In law, wrongful dismissal, also called wrongful termination or wrongful discharge, is a situation in which an employee's contract of employment has been terminated by the employer, where the termination breaches one or more terms of the contract of employment, or a statute provision or rule in employment law. Laws governing wrongful dismissal vary according to the terms of the employment contract, as well as under the laws and public policies of the jurisdiction.
Reda v Flag Ltd [2002] UKPC 38 is a case from Bermuda law, advised upon by the Privy Council, that is relevant for UK labour law and UK company law concerning the dismissal of a director.
The law for workplace bullying is given below for each country in detail. Further European countries with concrete antibullying legislation are Belgium, France, and The Netherlands.
Edwards v Chesterfield Royal Hospital NHS Foundation Trust and Botham v Ministry of Defence[2011] UKSC 58 is a UK labour law case, concerning wrongful dismissal.
Commonwealth Bank of Australia v Barker is a leading Australian judgment of the High Court which unanimously and firmly rejected the proposition that contracts of employment in Australia should contain an implied term of mutual trust and confidence.