A recent High Court decision in an employment case involving an employee who was dismissed on probation appeared to be a ‘game changer’. It seemed to be a decision of profound, and alarming, significance.
In a case-O’Donovan v Over-C Technology-the CFO (chief financial officer) was successful in his application to the High Court for an injunction around the termination of his employment whilst he was on probation.
Yes, it has been long established that an employee can be dismissed at common law for good reason, bad reason, or no reason if he/she was on probation. This High Court decision appeared to throw over that particular principle, although all decisions are made on their own particular facts and circumstances.
Nevertheless, employers in Ireland were always advised that termination during the probation period was not such a perilous exercise.
O’Donovan was terminated when he returned from holidays and was paid 1 month’s pay in lieu of notice. The termination letter claimed his performance was not satisfactory.
At first he had sought an appeal hearing but did not avail of it when it was offered as it was at a time that was not convenient for him or his legal counsel.
O’Donovan went to the High Court and sought an injunction preventing his dismissal on the grounds of absence of constitutional fair procedures and the termination was carried out in breach of his contract.
The High Court held that he had not established strong grounds that he had, in fact, been dismissed on ‘misconduct’ grounds. If that was the case, he had a constitutional right to fair procedures.
The High Court did decide, however, that he had established a strong case that he had been dismissed in breach of his contract by reason of the failure of the employer to draw his attention to allegations of poor performance leading to his dismissal.
The High Court found that he had established a strong case that: (1) the stated reason for his dismissal was his sub-standard or unsatisfactory performance during his probationary period; (2) a fair procedures obligation in the conduct of the relevant performance assessment arises under the terms of his contract of employment; and (3) there was a breach of that obligation in this case.
The High Court went on to grant the ‘Fennelly order’ preventing his termination and ordered that he be paid 6 months’ salary pending trial. (Read about that High Court case in this blog post).
The employers appealed this decision to the Court of Appeal.
The Court of Appeal
The Court of Appeal overturned the High Court decision.
It looked at the particular facts of the case and the nature of the complaints against the employee and whether the employee had been terminated as a consequence of poor performance or misconduct.
This consideration is critical to this case.
The Court of Appeal held that he was not terminated for misconduct but by reason of poor performance. This did not, therefore, give rise to an entitlement to natural justice.
The Court of Appeal also held that during the probationary period the employer must be permitted to terminate for no reason whatsoever and must be able to exercise choice. The employer is not obliged, therefore, to provide reasons for the termination.
If the employer had to afford the full panoply of fair procedures in assessing an employee’s performance during probation, it would negate the purpose of the probationary period. The Court of Appeal held there was an express term in the contract of employment permitting termination for poor performance.
61. There is no suggestion that the principles of natural justice must be applied where an employer terminates the employment contract of an employee on the grounds of poor performance.
I do not accept that a court can imply a right to fair procedures – still less uphold a cause of action for the breach of such an alleged right – in relation to the assessment of an employee’s performance by an employer (other than for misconduct, which does not arise here) during the probationary period, as this would negate the whole purpose of a probationary period. This does not prevent an employer from including a term in the contract which confers rights to fair procedures on the employee, even during the period of probation.
However, the situation would be different if the reason for termination was on the grounds of misconduct.
56. If an employer has a contractual right – in this case a clear express right – to dismiss an employee on notice without giving any reason, the court cannot imply a term that the dismissal may only take place if fair procedures have been afforded to the employee, save where the employee is dismissed for misconduct.
If the stated reason for seeking to dismiss an employee is an allegation of misconduct then the courts have, consistently, held that there is an obligation to afford that employee fair procedures in respect of any determination leading to such a dismissal. That does not alter the fact that an employer may still, if he is contractually free so to do, dismiss an employee for no reason. It simply means that where an employer is obliged to rely upon stated misconduct for a dismissal or, where not so obliged chooses to rely upon stated misconduct, the employer concerned is obliged to conduct the process leading to a determination as to whether there was such misconduct in accordance with many of the principles of natural justice.” (emphasis added).
69. In my view, Orr and Carroll remain good law. The principle established was specifically endorsed in Maha Lingham where Fennelly J. confirmed that a dismissal by reason of an allegation of misconduct attracts the right to fair procedures, whereas a dismissal in the absence of an allegation of improper conduct does not attract such a right.
Costs
The Court of Appeal awarded costs to the employer as follows:
76. I would allow the appeal and vacate the order of the High Court. Provisionally, I am of the view that the appellants have succeeded on the appeal and are entitled to an order for costs against Mr. O’Donovan in respect of the appeal and in respect of the hearing in the High Court. If Mr. O’Donovan wishes to argue for an alternative order for costs, he may apply within fourteen days of delivery of this judgment to the Office of the Court of Appeal to have the matter listed for a short hearing in relation to the costs of the appeal and of the High Court.
Takeaway
Every case will turn on its own facts but it seems to be safe to infer from this decision that
- The employee can be terminated on probation on performance grounds without the need to afford fair procedures and natural justice
- The employee is entitled to fair procedures and natural justice if he/she is terminated for misconduct, even if the employee is still on probation.