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Company Directors - Unfair Dismissal Solicitors UKSOLICITORS HELPLINE: ☎ 0344 414 0017
Generally speaking an executive or director of a company is often in the same position as a non executive employee when it comes to issues of wrongful dismissal and redundancy except that a director’s contract of employment may give additional protection with opportunity to claim more than statutory damages. The most recent legislation has however ensured that employees can now receive substantial compensation from the Employment Tribunal (ET) for wrongful dismissal and the available ET awards may exceed those available under a contract of employment. Each and every case of an executives or directors unfair dismissal must be considered on its merits after substantive investigations and consideration of all available documentary evidence, including a detailed review of the contract of employment to decide which course of action will be the most rewarding. The ET does however have the power to order reinstatement which may be high on some litigants wish list.
There is no formal statutory definition for an executives or directors unfair dismissal however the Employment Tribunal has determined that unfair dismissal is termination of employment for reasons that are unreasonable and thereby unlawful. It should be added that an unfair dismissal is generally considered to occur for no good reason or because the employer has failed to properly follow an agreed grievance procedure. There are many circumstance where an executives or directors termination of employment may be deemed to be unfair and unlawful including :-
- discrimination on the grounds of race, sex, age, religion or disability
- harassment on the grounds of race, sex, age, religion or disability
- victimisation following complaints of unlawful actions by others
- membership or non membership of a trades union
- taking maternity/paternity/ante natal/dependents/parental leave
- behaviour outside employment that has no bearing or effect on employed status
- medical conditions that have no effect on employment
- refusal to work more than 48 hours per week
There are many reasons that justify an executives or directors dismissal that are not considered as being unfair including :-
- genuine redundancy (as opposed to a fake or sham redundancy)
- unacceptable behaviour - theft, assault, drunkenness or anti-social behaviour
- employee mentally or physically incapable of carrying out the work
- continuance of employment is illegal or a breach of statutory duty
- other substantial reasons determined by an Industrial Tribunal
Constructive dismissal is a form of unfair dismissal that occurs in circumstances where an employers behaviour has deteriorated to the point that the contract of employment has effectively been repudiated and the employed executive or director feels that there is no alternative than to hand in their notice. A victim of constructive dismissal can either terminate employment or apply to the ET or in circumstances where there is a contract of employment, issue a summons in a court of law claiming damages under common law for breach of that contract of employment. Examples of employers conduct that may justify constructive dismissal include :-
- loss of status, salary, authority or position
- refusal to promote when equitable
- harassment, bullying, humiliation, discrimination, victimisation or abuse
- unreasonable amendments to working hours, conditions or contracts
- false, malicious, untrue or unsupported accusations and allegations
- unreasonable or excessive discipline or authoritarian attitudes
- employer's breach of the implied term of trust and confidence
Contracts of Employment
Most executives and directors are employed under a contract of employment and almost all dismissals of executives and directors are in breach of the terms and conditions to be found within most contracts notwithstanding the fact that it is usually the employers solicitor that prepares the contract with little opportunity for the executive or director to alter or amend its terms. Most employment contracts are presented to executives and directors on a take it or leave it basis. If a contract of employment was not part of the original arrangement it is usually down to the initial exchange of correspondence which may well preserve valuable common law rights that full contracts often seek to extinguish.
Executives and directors should beware the contract of employment that is presented at a late stage as it may merely be a precursor to dismissal in an attempt to secure more advantageous terms for the employer following termination of the employment.
It is now a matter of some importance to ensure that the most financially advantageous course of action is taken because in the past whilst contracts of employment usually provided greater protection and higher compensation it is now a fact that increased compensation awards available in the ET especially in cases of discriminations have exceeded damages available under many contracts of employment.
Whether or not there is a genuine redundancy situation for an executive or director is a matter of fact however some employers allege that the reason for the dismissal is redundancy when in fact there is no genuine redundancy situation, in order to afford themselves of a cheaper method of getting rid of an executive or director for spurious reasons and having thereafter to pay perhaps unlimited damages for unlawful dismissal or for breach of contract. A genuine redundancy situation occurs where an employer :-
- has ceased the business for the purposes of which the employee is employed
- has ceased business in the place where the employee is employed
- no longer require the employee because the work has ceased or diminished no longer require the employee because the work in the place where they were so employed has ceased or diminished
If an executive or director and an employer wish to terminate employment by mutual agreement they enter into a compromise agreement whereby the employer pays the employee an agreed sum in exchange for the employee agreeing to take no further legal action against the employer in the future. This type of arrangement usually comes at the behest of the employer who wants to reduce staffing levels but does not want the uncertainty of potential legal action in the future or it may be used as a method of settling legal proceedings or threatened legal proceedings in either the Employment Tribunal or in the civil courts as a result of an action for breach of contract. There are strict statutory requirements to validate compromise agreements under UK law and it is always necessary for the executive or director to take independent legal advice.
Restraint of Trade
It is almost certain that a contract of employment drafted by a qualified lawyer will contain provisions for restraint of trade seeking to limit an executives or directors future employment prospects with competitors of the employer. Although an executive or director will have signed the contract containing restraint clauses it is not always the case that they are enforceable. Clauses in restraint of trade must be reasonable and must protect a legitimate interest of the employer. The extent of the restriction must be no greater than is absolutely necessary and the geographical range and time limits must be appropriate. If any of these items are excessive, the entire clause will be invalid and the courts will not substitute another more reasonable and enforceable restraint. In short the court will ‘blue pencil’ the item out of existence allowing the executive or director a totally free hand. A cynical employee may well encourage an ignorant employer to extend the location, product and time of a restraint of trade clause in the full knowledge that it is totally unenforceable.
Specialist Employment Solicitors
Our specialist employment solicitors deal with unfair dismissal claims on behalf of executives and directors before the industrial tribunal and legal action for breach of contract before the County Court and the High Court. They free advice without further obligation to establish whether or not there is a viable case. To speak to an expert just complete the contact form or email our offices or use the helpline. Very tight time limits apply to matters heard before the Employment Tribunal and you should not delay seeking legal advice.SOLICITORS HELPLINE: ☎ 0344 414 0017