Categories
Employment Injunctions

High Court Orders 6 Months’ Salary Payment In Probation Dismissal Case

The High Court has issued a decision in a case involving a dismissal from the employment during probation that should be a warning for employers.

Background

Donal O’Donovan, the chief financial officer (CFO), was dismissed in January 2020 by Over-C Technology, his employer, and confirmed this decision 10 days later.

Mr O’Donovan issued High Court proceedings seeking an injunction preventing his termination and a number of declarations including that his dismissal was unlawful and invalid, that he remained an employee, damages for breach of contract, breach of duty, and breach of his contractual right to fair procedures.

Mr O’Donovan’s contract of employment, which commenced in July 2019, contained a 6 month probationary period and a notice period of 1 month during the first year of employment, 3 months thereafter.

Mr O’Donovan was given a staff handbook but there was little in it concerning disciplinary procedures.

Mr O’Donovan was on holidays in December 2019-January 2020 and when he returned in January the CEO, Mr Elliot, terminated his employment with immediate effect and advised he would receive 1 month’s pay in lieu of notice.

The termination letter which was sent to Mr O’Donovan claimed his performance as CFO had failed to meet the necessary standard and he had mislead the board about projected sales figures, failed to prepare adequately for the board meeting, failed to answer a question about the cash position of the company.

Mr O’Donovan appealed this decision which was to be heard by a director of the employer.

However, he raised concerns about procedural aspects of the proposed appeal hearing including that the time appointed for the appeal was not suitable for him or his legal representative.

The director responded by saying that “I note you do not now wish to proceed with the appeal today. I now confirm your dismissal stands”.

Mr O’Donovan’s solicitor wrote to the employer claiming the dismissal was unlawful and in breach of his contract of employment. The employer’s position was that he had been dismissed during the probationary period and it was lawful and valid.

Application for injunction

The request for an injunction was based on the argument that his termination was carried out in breach of contract and in breach of his constitutional right to fair procedures.

Test for an employment injunction

The High Court pointed out that the general principles which apply are the Campus Oil principles (Campus Oil v Minister for Industry (No. 2) [1983] 1 IR 88). Put simply those principles are that the applicant must establish that:

 (1) there is a serious question to be tried on the applicant’s entitlement to a permanent injunction;

(2) the balance of convenience favours the grant of interlocutory relief, which requires, but is not limited to, a consideration of whether damages would be an adequate and effective remedy for an applicant who fails to obtain interlocutory relief but later succeeds in the action at trial and, if not, whether the applicant’s undertaking to pay damages would be an adequate and effective remedy for a respondent against whom interlocutory injunctive relief is granted but whose defence to the action succeeds at trial.

The Campus Oil principles hold that the applicant must establish a strong case, likely to succeed at the hearing of the action, not just that a serious question is to be tried.

The High Court then looked at whether Mr O’Donovan had, based on the evidence and arguments, established a strong case that he was dismissed for misconduct. The High Court decided

I am not satisfied that Mr O’Donovan has established a strong case, likely to succeed at the trial of the action, that he was dismissed, wrongly and in breach of his entitlement to fair procedures, for ‘misconduct’.

However, the High Court held that he had established a strong case that his dismissal was not properly carried out in accordance the terms of this contract by reason of the failure of the employer to draw his attention to the alleged performance issues which led to his dismissal.

The court recognised that the traditional common law position is that a contract can be terminated by the employer on reasonable notice whether for good or bad reason. However, a misconduct dismissal does give rise to an obligation to conduct the process in accordance with the principles of natural justice.

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 decision

The High Court decided:

In my judgment, Mr O’Donovan has established a strong case that he had an implied contractual right to fair procedures in the assessment of his performance during his probationary period, which right was breached in the manner and circumstances of both the decision on 7 January to summarily dismiss him for sub-standard performance and the decision on 17 January to deem his appeal against that decision to have been withdrawn.

67. I am satisfied that the balance of convenience or, differently put, the least risk of injustice favours the making of a Fennelly order in the following terms:

(1) That the defendants are restrained from repudiating Mr O’Donovan’s contract of employment pending the trial of the action on the following specific terms:

(i) That Mr O’Donovan is to be paid his salary for a period of six months from the end of January 2020 (and any applicable bonus and other benefit arising during that period), on the provision by him of an undertaking to carry out any of the duties of CFO that the defendants may require of him.

(ii) That the defendants are not required to assign any of the duties of CFO to Mr O’Donovan at any time pending the trial of the action but, insofar as they do beyond the period of six months from the end of January 2020 and pending  the trial of the action, must pay his salary (and any applicable bonus and other benefit) accordingly.

(iii) That the defendants may choose to put Mr O’Donovan on leave of absence rather than assign any duties to him, but that is without any prejudice to their obligation at (i) above.

(iv) That the defendants are released from their undertaking not to replace Mr O’Donovan by the appointment of a new CFO and may do so as they see fit.

68. I have fixed the period during which the defendants must pay Mr O’Donovan’s salary as one of six months, rather than the entire period pending trial, because, in light of Mr O’Donovan’s acknowledgment that the relationship of mutual trust and confidence between the parties has irretrievably broken down, his claim is, in reality, one for a fair termination process rather than for reinstatement in the role of CFO. It is also significant that, as Carroll J noted in Orr v Zomax Ltd [2004] IEHC 47, (Unreported, High Court, 25 March 2004) (at para. 58), on appeal to the Supreme Court in Fennelly, payment of salary was limited to six months.

Takeaway for employers

Employers need to be careful about affording fair procedures to the employee, even if he/she is on probation. Failure to do so may be a breach of the contract of employment as that contract may contain an implied right to fair procedures in having the employee’s performance assessed, which was the case in Mr O’Donovan’s case.

The employer’s failure in this case to accommodate Mr O’Donovan’s appeal was one of the factors for which the High Court had regard.

Read the full decision here.

Categories
Employment Injunctions

High Court Injunction Applications in Employment Cases-2 Contrasting Decisions?

judicial review

It has long been the case that at common law an employee could have her employment terminated for good reason, bad reason, or no reason. Any remedy then open to the employee would be a statutory claim-that is, a claim under unfair dismissal legislation such as the Unfair Dismissals Act, 1977.

But once the employer had terminated in accordance with the contract of employment and had given the contractual notice period the employee had no cause of action in the Courts for breach of contract.

Two decisions from the High Court on this point at the end of 2018 appear to be inconsistent, however. Both cases involved the employees seeking an injunction to prevent their dismissal by way of a no fault termination-that is, dismissal for good, bad or no reason.

Obtaining an injunction in employment cases

The normal standard for obtaining an injunction is set out in the principles in the ‘Campus Oil v Minister for Industry and Energy [1983]’ as follows

  1. That there is a fair or bona fide issue to be tried-in other words the claim must not be frivolous or vexatious;
  2. If there is a bona fide issue to be tried the Court must then consider whether damages would be an adequate remedy or not. If so the Plaintiff will be required to give an undertaking as to damages, that is, in the event of the injunction being refused the Plaintiff will pay damages to the person injuncted;
  3. That the balance of convenience favours the granting of the injunction rather than its refusal.

The test for an injunction in an employment case is higher, however, and the applicant must show “that at least he has a strong case and that he is likely to succeed at the hearing of the action” (Supreme Court, Maha Lingham v Health Service Executive).

Two High Court Decisions

In Whooley v Merck Millipore Limited and Merck KGaA [2018] IEHC 725 the company terminated the employee’s employment on ‘no fault’ basis and gave her the contractual notice. The High Court refused her application for an injunction preventing her dismissal as her contract had already been terminated. The Court opined, however, that she may have succeeded in an injunction application prior to the termination of her contract.

In Grenet v Electronic Arts Ireland Limited [2018] IEHC 786 the employee succeeded in the injunction application as the Court accepted the employee’s argument that a later no-fault termination was merely an earlier faulty termination dressed up in different clothes and the earlier termination would have had serious reputational consequences for the employee and would have prevented him from vindicating his good name.

So, two High Court applications seeking an injunction to prevent a dismissal from employment; one successful, the other unsuccessful.

Read the decisions here:

Grenet v Electronic Arts Ireland Limited [2018] IEHC 786

Whooley v Merck Millipore Limited and Merck KGaA [2018] IEHC 725

Learn more about injunctions and contracts of employment here.

Categories
Employment Claims Employment Injunctions

Injunctions and the Contract of Employment in Ireland-What You Need to Know

 

employment injunction

What is an injunction? It is a Court order restraining a person from carrying out a specific act or requiring him to perform such an act.

 

In employment law the use of an injunction where there is a threatened or actual dismissal has increased in the last few decades. And its use is not confined to only dismissal situations.

They have also been sought in relation to sick pay, pickets, advertising positions, ending suspensions etc.

However the increasing use of the employment related injunction must be viewed against the backdrop that Courts are very reluctant to order specific performance of a contract of personal service.

Prohibitory or Mandatory?

The most common form of injunction sought is a prohibitory injunction seeking to restrain the employer from doing a specific act.

An interim or interlocutory injunction is generally sought on an ex parte basis to preserve the status quo in a dispute until the action can be tried in Court (interlocutory) or until a further order can be made by the Court prior to the hearing (interim). It is generally applied for where the matter is particularly urgent.

Principles governing the granting of an injunction

The principles were summarised in Campus Oil v Minister for Industry and Energy [1983] and are

  1. That there is a fair or bona fide issue to be tried-in other words the claim must not be frivolous or vexatious;
  2. If there is a bona fide issue to be tried the Court must then consider whether damages would be an adequate remedy or not. If so the Plaintiff will be required to give an undertaking as to damages, that is, in the event of the injunction being refused the Plaintiff will pay damages to the person injuncted;
  3. That the balance of convenience favours the granting of the injunction rather than its refusal.

As stated above, Courts will refuse to order the specific performance of a contract of employment. Because it would be impossible to supervise and because damages should be an adequate remedy. However there are exceptions but there must be mutual trust and confidence between employer and employee.

When will Courts grant an injunction in an employment law case?

Over the last 30-40 years the Courts have affirmed the traditional position that damages are an adequate remedy in cases of purported wrongful dismissal. However case law has shown that injunctions may potentially be granted in the following 6 situations:

1. where the dismissal is in breach of contract eg the absence of the contractual notice period or the absence of a contractual disciplinary process;

2. where the dismissal is ultra vires;

3. where the dismissal is in breach of fair procedures;

4. where the purported grounds for dismissal are absent eg alleged redundancy;

5. where the dismissal is in breach of a constitutional right;

6. non dismissal injunctions eg preventing the advertising of a position pending the trial of the action.

Wrongful dismissal at common law and statutory unfair dismissal

(3) Where proceedings for damages at common law for wrongful dismissal are initiated by or on behalf of an employee, the employee shall not be entitled to redress under this Act in respect of the dismissal to which the proceedings relate.(Section 15 Unfair Dismissals Act, 1977)

The employee must therefore choose between suing for damages at common law or claiming relief under unfair dismissals legislation. So the employee when seeking an injunction or declaration will not include a claim for damages for breach of contract in order to keep open the door to the unfair dismissals legislation.

Generally, injunctions are sought be employees on an ex parte basis, that is without notice to the other side. However where the application is unsuccessful the consequences for the employee can be serious on two significant grounds:

1. Court costs and

2. the fact that the employee’s application would have been predicated on the subsistence of the employment relationship-clearly this makes it difficult to then claim unfair dismissal at the Employment Appeals Tribunal.

If you are considering seeking a Court injunction in an employment matter, make sure to obtain professional legal advice first.