Employer remedies - Assessment Question/ Tips PDF

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Employer remedies:  Summary dismissal (self-help remedy in response to conduct by the employee which is in serious breach of the contract or inconsistent with the employment contract)  Injunction  Damages  Employer may claim damages for breach of contract by employee in circumstances where employee leaves without giving proper notice, or employee acts in breach of contract resulting in loss to employer  Measure of damages usually the cost of finding and training a replacement employee  Employer under duty to mitigate loss – must take reasonable steps  Loss to employee measured by the loss of services of the particular employee who is in breach – difficult to measure

Employee remedies: (at common law)  Actions for wages  Resignation-in face of constructive dismissal (an employee can resign at any time by giving notice as with an employer terminating a contract with sufficient notice)  Injunction  Damages 

Example of breaches by employer entitling employee to claim damages:  Breach of duty to provide work  Underpayment  Failure to pay wages in breach of contract  Failure to pay other benefits e.g. bonuses under contract  Damages for breach of a contractual disciplinary procedure prior to termination which has resulted in loss and damage  Action for unlawful suspension (only available where employee remains willing, ready and able to perform contract)

What appears to have been the basis of Mr Carney's claim against the Club?   

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Breach of their own contract whey they sacked him. Fired 3 days after release Wasn't afforded "procedural fairness" from Cronulla's management after a photograph popped on social media stating he performed a "vulgar act" His manager, David Riolo, wrote to the sharks that they did not follow the correct protocol for dealing with disciplinary issues as agreed in the collective bargaining agreement between the NRL and Player's association. "Should've been awarded 5 days' notice to attend to that and appear before the board, none of this was followed" Argue he wasn't given a chance to respond in accordance with Clause 8.1

1. Outline the remedies available to a wrongfully dismissed employee under common law. Dismissal wrongful where:  Employee not given requisite notice to lawfully terminate contract  Employee summarily dismissed for misconduct in circumstances which do not warrant summary dismissal  Constructive dismissal of employee  Where employer fails to follow contractual procedures required prior to dismissal

Remedies available can consist of:   

Action for damages for wrongful dismissal – allows recovery of damages for wages or salary that employee prevented from earning by virtue of wrongful dismissal Action upon a quantum meruit for work actually performed in respect of which payment has not been made Action for wages due under contract or award

2. What is the difference between the action for wages and an action for damages?

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Action for wages An employee who has not been paid wages for service will be entitled to make a claim for unpaid wages under contract, and may also have a statutory claim for those wages. Where an employee is entitled to claim unpaid wages, they are not under a duty to mitigate their loss. Where the employee claims damages for breach of contract, there is a duty to mitigate. In relation to the right to claim wages, whether under contract or statute, remember that the entitlement to wages is dependent on the performance of service (the 'wages-work bargain'). This means that, even where the employee is wrongfully prevented from performing service, the employee cannot claim wages i.e. they cannot enforce the contract on the basis that they remained reading, willing and able to perform the contract (Automatic Fire Sprinklers v Watson (1946) 72 CLR 435) Action for damages An action for damages of contract is available to both the employer and employee The requirement in an action for damages for breach of contract that the plaintiff be able to prove if called upon that she or he was at all relevant times ready, willing and able to perform the contract. (Example in textbook: in an industrial context, during a strike period no action for damages will be available) An employer may recover damages for breach of the contract by the employee in circumstances where the employee leaves without giving appropriate notice, or has acted in breach of the contract resulting in loss to the employer Additional Info The action for damages for wrongful dismissal differs from the other available actions in that it allows recovery of damages for wages or salary that the employee has been prevented from earning by virtue of the wrongful dismissal.

3. Identify the principles applied by the common law in assessing damages to a wrongfully dismissed employee.  

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General rule: employee wrongfully dismissed can recover as damages pecuniary loss resulting from failure to terminate employment in accordance with terms of contract – usually equivalent to wages for period of proper notice Rule in Addis: where an employee is wrongfully dismissed, damages for dismissal cannot include compensation for the manner of the dismissal, or injured feelings, or for the loss the employee may sustain from the fact that the dismissal itself makes it more difficult for the employee to obtain fresh employment. Baltic Shipping v Dillon: accepted principles in Addis. However, noted two exceptions to this rule:  Where breach of contract results in a physical injury (including psychiatric illness); and  Where object of contractual obligation breached is to provide peace of mind and prevent distress and humiliation e.g. holiday cases

Limitations of damages to claims for economic loss o Employee cannot claim (general) damages for hurt feelings, distress, humiliation arising from breach of contract, the difficulty the manner of the dismissal has caused

Frances was retrenched from her role as Marketing Manager with Eastpac Bank in Sydney in mid 2017. After a short holiday, she was approached by a friend, Jasmine, who was in the process of buying a landscaping business, as she knew thought that Frances may be interested in helping her market the business. At first, Frances worked for Jasmine for free, but once Jasmine purchased the business in late 2017, she offered Frances a full-time role as marketing manager, on a salary of $100,000 per year. There was no written contract of employment, as Frances and jasmine had been friends for some time, and Jasmine told Frances she did not feel the need to ‘formalise things’. She also told Frances that once the business was up and running, she would look at making Frances a full partner. During 2018, Frances has worked very hard marketing the landscaping business, and it has been a huge success. Frances and Jasmine have worked on a number of projects which were going to significantly increase the size of the business in 2019. However, every time Frances tried to talk to Jasmine about becoming a partner, Jasmine has changed the subject. Frustrated, she began to look around for other work and in December she accepted a job as the Head of Marketing with Q-Flight Airlines. Q-Flight advised Frances they needed her to start straight away, so, on 18 December Frances gave Jasmine 1 week’s notice that she was leaving. Jasmine is furious, because she knows she cannot complete the 2019 projects without Jasmine’s help. Jasmine has come to you for advice, as she wants to sue Frances for breach of her employment contract.

Advise Jasmine of the likely outcome of any contractual claim she might make against Frances.

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Frances was made redundant. Approached by Jasmine in the process of buying a landscaping business. Worked for free initially then integrated to full-time on a 100k salary. No written contract and Jasmine felt she didn’t need to "formalise things" 2018, Frances worked so hard it became a huge success. Potentially 2019 was going to be big Jasmine was no more interested in making Frances partner. Changed roles to Head of Marketing at Q-Flight Airlines, so Frances gave 1 week notice Jasmine was fustrated because she relied heavily on Frances' assistance. Response Jasmine would most likely fail as she doesn’t have any substantial claim Despite their being a contract, offer , consideration and acceptance, Frances did fulfil her obligations thoroughly and to the extent where the business prospered. There was no breach of contract and Frances did submit a 1 weeks' notice that she was leaving. Frances did not act in such a way to intentionally breach the contract resulting in a loss to the employer Nothing unlawful about France's conduct, no term which stipulated that Frances needed to fulfil all the projects towards the end of 2019. In the case of TCN Channel Nine v Hayden, it further reinforces that the court will look to the facts rather than proceed upon an improbable factual hypothesis. No clear evidence that 2019 will be a break-out year, only a hypothesis because any event could occur Frances hasn't taken part of any industrial action in the form of work banks or strikes either

4. Explain the rule in Addis v Gramophone Co [1909] AC 488. Should this rule be retained? Addis v Gramophone Co [1909] AC 488

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The 'Addis rule' - the rule stems on the principle that the measure for the breach of contract is unaffected by the manner of the breach The rule is said to be an application of the breach. NOT FOLLOWED IN AUSTRALIA Burazin v Blacktown o Note that, in Burazin, the Industrial Relations Court of Australia, having found that Ms Burazin was not entitled to damages at common law for the distress caused by dismissal, awarded Ms Burazin an amount of compensation for distress and humiliation as part of her statutory unfair dismissal claim. This is no longer possible under the Fair Work Act 2009 (Cth), due to s 392(4), which provides:  The amount ordered by FWA to be paid to a person….. must not include a component by way of compensation for shock, distress or humiliation, or other analogous hurt, caused to the person by the manner of the person’s dismissal. Hadley v Baxendale (1854) 156 ER 145 o Damages which may be recovered for a breach of contract are such as may fiarly and reasonably be considered either: o (1) arising naturally, that is, according to the usual course of things, from such breach of contract itself, or o (2) such as may reasonably be supposed to have been in the contemplation of both parties, at the time they made the contract, as the probable result of the breach of it  NOTE: the type of damage cause from humilitation/ distress arising from the manner of breach does not fall under either and therefore should NOT be compensated Addis v Gramophone Co [1909] AC 488 o Headnote: dismissed employee cannot sue at common law for the manner of dismissal or for loss of employment prospects arising from the harsh and humiliating manner of the dismissal o Facts: Mr Addis was employed as a manager of the Calcutta branch of the Gramophone company. He was given 6 months' notice of termination but was not permitted to work in that time and wasn't paid any wages. The way in which he was relieved from work was particularly humiliating and was bound to destroy his reputation and employability in the commercial community of India where he was working. o The jury awarded him a lump sum representing loss salary in commission and an additional 600 Pounds (1909 it was a considerable sum). House of Lords disallowed the 600 pounds because it was concluded that the jury has awarded this sum for the humiliating manner of his dismissal. o Actual Ratio? (HEAVILY DISPUTED) (out of the Lords, only Lord Loreburn addressed the issue of whether an employee can claim for contractual damages for the manner of his/ her dismissal. )  Lord Loreburn: If there be a dismissal without notice the employer must pay an indemnity; but, that indemnity cannot include compensation either for the injured feelings of the servant or for the loss he may sustain from the fact that having been dismissed of itself makes it more difficult for him to obtain fresh employment.. The rule as to damages in wrongful dismissal, or in breach of contract to allow a man to continue in a stipulated service, has always been, I believe, what I have stated. It is too inveterate (too established) to be altered now, even if it were desirable to alter it."  Other Law Lords: Could a libel action be tried as a breach of contract

Lord Shaw (dissent): The jury could award damages in contract as well as Tort on the basis that the defendant was a wrongdoer. Accepted as general principle of contract law Example of 'least burdensome' rule. "A party to a contract is entitled to perform the obligations of the contract in the way that is least costly to them: o Employment context: Because an employer at common law could terminate a contract validly by giving reasonable notice it means all the employee has loss from the breach is the notice period that he/she was denied. Baltic Shipping v Dillon (1993) 176 CLR 344: (HC acceptance of Addis) o Mason CJ: 'The plaintiff could not recover in an action for damages for breach of contract in respect of his injured feelings and loss of employment prospects arising from the harsh and humiliating manner of his dismissal' o 2 exceptions  (1) where breach of contract results in physical injury (includes psychiatric illness)  (2) where object of contractual obligation is to provide peace of mind prevent distress and humiliation e.g. "holiday" cases - Jarvis v Swans Tours [1973] 1 QB 233  Note: Standard contracts do not fall into the 2nd category 

5. What is the ‘Johnson exclusion zone’ and why has it been held to apply? 

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UK Case: Johnson (AP) v Unisys Limited [2003] 1 AC 518 made it clear the duty of trust and confidence did not extend to the termination of the employment contract and this view was followed in Australia  Even when the employee's employment was terminated in a humiliating manner, the employee could not claim common law damages for distress and humiliation arising from the breach of the duty of trust and confidence nor could they claim damages for psychiatric injury arising from the manner of the dismissal  The reasoning for this was because the duty of trust and confidence did not extend to the dismissal.  The justification for not extending the duty of trust and confidence to the termination of the employment contract was that the duty of T&C related to the continuation maintenance of the contract and therefore did not extend to the way in which it was terminated 'Johnson exclusion zone' continues to be the position in the UK even though the duty of T&C is recognised there. This led the courts in the UK to draw an artificial line between conduct of the employer which occurs during employment (investigations, disciplinary procedures) and the act of terminating the contract itself The artificial line has been critised. Due to drawing difficulty in situations to draw a clear line between what is a disciplinary procedure and investigation leading to termination and what constitutes the termination itself.  It too encourages employers to terminate people without conducting an investigation or any form of disciplinary procedures because the termination itself cannot be subjected to the duty of T&C but the disciplinary procedures can  Effect: In the UK there is no duty of T&C when it comes to the termination of the employment contract which means there cannot be any breach of that duty and therefore no damages of any kind (financial)  In the AU there is no duty of T&C whether related to the termination or other aspects of the contract therefore no breach nor damages

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The 'Johnson exclusion zone' cont. Analogy of a fruit tree. Contractual duties are the trunk of the tree-> the branches of the tree is the breach -> smaller branches are causation and remoteness and the fruits are damages. The courts in the UK have said when an employee is trying to claim damages arising from the termination of employment contract, they cannot rely on the breach of duty of T&C as a cause of action because (they cut off the trunk) there is no duty of trust and confidence when it comes to termination of the employment contract. Therefore is there is no duty, no breach exist In AU, there's no trunk (contractual duty) and therefore no breach and no damage

Expansion of 'Johnson exclusion zone' : Edwards v Chesterfield Royal Hospital NHS [2011] QB 339 The courts in the UK have gone to hold that damages for distress and humiliation arising from a dismissal can't be claimed even where the contract contains express terms which require the employer to follow disciplinary procedures prior to terminating. They've extended the principle that comes from Johnson that there not being a duty to T&C at the moment of termination that require the employer acting a particular way leading up to the termination

6. Explain the effect of the High Court’s decision in Barker v Commonwealth Bank on employee’s right to claim damages for distress and humiliation arising from the manner of his or her dismissal Where does this leave us? UK:  Can get damages for financial loss flowing from breach of duty of T&C during employment, but not for manner of termination  Can get damages for psychiatric injury for breach of duty of T&C which occurs during employment (the way an investigation or procedure), but not for manner of dismissal or fact of termination  Cannot get damages for injured feelings (if there is no psychiatric injury) for breach of T&C either during employment or for manner of dismissal AU:  No duty of T&C (Barker), therefore no damages (financial or other forms of compensation) of any kind for breach  Employee would need to: o Identify breach of another implied term (duty to co-operate, common law duty of the employer to provide a safe workplace); OR

o Identify a breach of an express term (to disciplinary procedures that haven't been

followed) AND STILL o Overcome the rule in Addis

Subsequent treatment of Addis o Prior to Barker v Commonwealth Bank (2014) 253 CLR 169  Whether a breach of the duty of T&C (trust and confidence) by the employer would result in damages for distress/ humiliation  The courts drew an exclusion zone around the termination of employment

7. Explain the concept of the ‘duty to mitigate’ as it applies to the employment contract. 

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The duty to mitigate is not really a duty on the person alleging to have suffered loss because the onus falls upon the defendant to make good the allegation that the plaintiff has failed to take reasonable steps to mitigate. It applies equally to an employer as it does for an employee. An employee who has been wrongfully dismissed must take reasonable steps to mitigate their losses which in practical terms means the employee to diligently seek suitable alternative employment o Objective test requiring the employee to take reasonable steps only o In Brace v Calder [1895], the plaintiff's employment terminated on dissolution of a partnership with whom he was employed, He was immediately offered re-employment by two partners on similar terms and conditions. He refused o Held: The nominal damages only were recoverable  Employees not generally required to take inferior employment and sometimes unreasonable to accept a lower status and salary level o Yetton v Eastwoods [1967]. Plaintiff was employed as a managing director of a company for a fixed term of five years at a salary of 7,500 euros. With threes of the contract left, he was wrongfully dismissed but wwas offered employment at the same company with the same salary but as a lower status. The plaintiff refuded to accept and sought employment elsewhere. He then sought employment at 4,000 euros p.a. but still failed. o Held: His refusal to ac...