The Employment Appeal Tribunal (EAT) found that, while the claimant was wrongfully dismissed, he was not, however, entitled to compensation due to the application of the least burdensome performance principle.
Facts:
The claimant began employment as a Contracts Coordinator on 23 January 2023, subject to a contractual 6-month probationary period, one which required 5 weeks' notice for termination. The contract included a garden leave clause but no clause permitting Payment in Lieu of Notice (PILON).
Shortly after he began his employment, disputes arose over his work pattern, and the respondent began to have concerns about his behaviour. By 22 February 2023, the claimant had emailed the respondent stating he had lost trust and confidence in his employer and feared that it was impossible to restore. On 3 March 2023, HR obtained authorisation to dismiss the claimant, citing his inflexibility, negative communications, and uncooperative behaviour, concluding that his values did not align with those of the organisation.
Though a "Formal Probation Assessment Meeting" was scheduled for 15 March, the decision to terminate had already been made. On 15 March 2023, the claimant was dismissed with immediate effect and paid 5 weeks' notice monies. On 24 March 2023, he appealed the dismissal while seeking an assurance that he would not be reinstated, confirming that neither party wished the employment relationship to continue.
The Employment Tribunal (ET) found that the claimant had not been wrongfully dismissed, while accepting that the respondent had breached the contract by instituting a PILON, yet ruling that no damages flowed from that breach.
Decision:
The EAT allowed the appeal in part on a point of law, although the outcome of the claim remained the same, specifically that the claimant was not awarded any further compensation. The EAT determined that the ET had erred in law by failing to find that the claimant was wrongfully dismissed, as the employment contract did not contain a PILON clause. Therefore, the employer's action in dismissing the claimant with immediate effect and simply handing over the notice pay constituted a breach of contract. This breach rendered the dismissal technically wrongful.
Despite finding a wrongful dismissal, the EAT, however, upheld the outcome of zero compensation by applying established common law principles for assessing damages. The EAT applied the least burdensome rule, which dictates that, when an employer breaches a contract, damages are assessed based on the assumption that the employer would have terminated the contract in the least burdensome way lawfully available to them.
The EAT rejected the claimant's argument that damages should be extended (the "Gunton extension") to cover the period required to complete the full 6-month probation procedure. Since the issue was a fundamental breakdown of the employment relationship, the employer was entitled to rely on the simpler, contractual 5-week notice clause, rendering the lengthier procedural steps irrelevant to the calculation of damages.
Implications:
This case offers a stark reminder that, if a company wishes to dismiss an employee with immediate effect and simply pay them in lieu of notice, then the contract must explicitly include a PILON clause.
In the absence of a PILON clause, any immediate dismissal (even with payment) is effectively a breach of contract, one which effectively renders the dismissal wrongful in law. While this breach resulted in no financial damages in this specific instance, it still positions the employer on the wrong side of the law and can complicate any subsequent litigation.
Companies should review their policies to clearly state whether the full procedure is mandatory before termination, or otherwise, the notice clause can be used independently in situations other than remedial underperformance (e.g., in cases of misconduct or a fundamental breakdown in trust).
