What is wrongful dismissal?
A wrongful dismissal claim is a claim brought by an employee for a breach of the employment contract. It is not the same as unfair dismissal and only looks at the employment contract to see if the employer has breached it. The most common breach is where an employer dismisses the employee without notice or with less than the minimum notice period as required either by statute or by the employee’s employment contract. Advance notice of termination is required, as specified in an employee's contract of employment. However, the notice period must meet certain statutory (ie legal) minimum requirements. For more information, read Notice periods.
To bring a wrongful dismissal claim, an employee must establish that they were dismissed
in breach of their written employment contract or with less than the statutory minimum notice period (eg summary dismissal), and
that they suffered a loss as a result (eg a loss of wages).
An employer can usually justify summarily dismissing an employee if the employee commits gross misconduct or a serious breach of their employment contract (eg theft, violence or dishonesty). However, an employer’s failure to follow a contractual disciplinary procedure can still mean that a dismissal still amounts to wrongful dismissal. For more information, read Summary dismissal and gross misconduct and Disciplinary warnings.
Rules on wrongful dismissal
Employees should make any claims for wrongful dismissal in an Employment Tribunal within 3 months following the effective date of termination of their employment.
There is no required length of service for wrongful dismissal as this is a breach of contract claim. Any damages awarded from a wrongful dismissal claim will reflect the losses that the employee is calculated to have suffered as a result of the wrongful dismissal. The damages recoverable can include salary payments the employee would have received (eg if they’d worked through their notice period) and other benefits that would have been earned or accrued during the notice period, for example, bonuses, pension entitlements, and private health cover.
Dismissals with payment in lieu of notice
It is fairly common for an employer to pay an employee not to work out their notice period. Such agreements are called payments in lieu of notice (PILON) and are typical in some employment contracts. These payments are usually substituted for letting the employee work their notice period if, for example, the employer wants to minimise any risks of the employer continuing to work within their organisation. If the employer makes a PILON and the employee accepts, there wouldn’t be any breach of contract, which is very useful in preventing wrongful dismissal claims. For more information, read our guide on Payments in lieu of notice and create your Contract of employment with a PILON clause.
Wrongful dismissal vs unfair dismissal
Wrongful dismissal is a breach of contract claim whereas unfair dismissal is a statutory claim. The former only looks at whether an employee's employment contract was breached when they were dismissed, whereas the latter determines the overall fairness of the dismissal.
With wrongful dismissal, there is no need for an employee to have been employed for a continuous period of 2 years, whereas bringing an unfair dismissal claim often requires an employee to prove their 2-years’ service with their employer (unless certain exceptions apply, ie ‘automatic unfair dismissal’) and other criteria before they can bring a claim for unfair dismissal. For more information, read Unfair dismissal.