Wrongful dismissal

Wrongful dismissal is a contractual claim. This arises where an employee has been dismissed and the employer has failed to fulfil his contractual obligations to the employee. Most commonly, the claim arises from failure to give notice, with financial compensation not just for salary, but for the value of the employee's entire remuneration package (including bonus and contractual benefits) during the notice period.

However, where employment has been terminated by reason of gross misconduct, there is no entitlement to receive notice or payment in lieu of notice.

It is important to be aware that there is a duty to mitigate losses arising from wrongful dismissal. Employers will therefore contest claims for the value of the entire notice period on the basis that the employee would be likely to obtain alternative employment within that period. Furthermore, account must be made for any alternative earnings during the notice period.

Often an employer will reserve a right to make a payment in lieu of notice on termination. This means that there is a contractual term allowing the payment to be made. If the term is operated the notice payment is taxable, but no account would be taken of any mitigation. This also means that the contract of employment is terminated lawfully so that all post termination restrictions contained within the contract remain in place, including any restrictive covenants or post termination confidentiality restrictions.

For further information on wrongful dismissal, please download a copy of our Executive Dismissal factsheet.