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The reasoning in Johnson v Unisys Ltd  UKHL 13,  1 A.C. 518 was a bar to a claim for damages by an employee for loss arising from the unfair manner of his dismissal in breach of an express term of his employment contract.
In conjoined appeals, the first appellant, an NHS trust, appealed against a decision of the Court of Appeal ( EWCA Civ 571) and the second appellant, the Ministry of Defence, appealed against a consent order reversing a decision of the High Court ( EWHC 646). In each case the decision appealed against was to the effect that the respondent employees (E and B) could, in principle, claim damages arising out of their unfair dismissal in breach of the express terms of their employment contracts.
Both E and B had been summarily dismissed on the ground of gross misconduct. In each case, provisions about disciplinary procedure had been incorporated as express terms of their employment contracts. They each claimed that their dismissals had resulted from the correct disciplinary procedure not having been followed, in breach of those express terms. Rather than making claims for unfair dismissal, they sought damages for breach of contract based on loss of reputation and loss of future earnings. The decision in Johnson v Unisys Ltd  UKHL 13,  1 A.C. 518 established that loss arising from the unfair manner of a dismissal was not recoverable as damages for breach of the implied term of trust and confidence. Such loss fell within what became known as "the Johnson exclusion area". The issues were (i) whether the reasoning in Johnson applied so as to preclude recovery of damages for loss arising from the unfair manner of a dismissal in breach of an express term of an employment contract; and, if so (ii) whether E and B's claims fell within the Johnson exclusion area.
HELD: (Lords Kerr and Wilson and Lady Hale dissenting) (1) The reasoning in Johnson was a bar to a claim for damages by an employee for loss arising from the unfair manner of his dismissal in breach of an express term of his employment contract. In establishing a statutory mechanism to safeguard against unfair dismissal, Parliament had provided a remedy that was strikingly less generous than that given by the common law for a breach of contract. It had also recognised that a breach of disciplinary rules and procedures in the course of a dismissal process was relevant to the fairness of the dismissal. Although the Employment Rights Act 1996, the Employment Act 2002 and the Employment Act 2008 had introduced various models for dealing with dispute resolution, Parliament had throughout linked a failure to comply with disciplinary procedures with the outcome of unfair dismissal proceedings. The provisions concerning disciplinary procedures were intended to operate within the law of unfair dismissal. It followed that, if provisions about disciplinary procedure were incorporated as express terms into an employment contract, they were not ordinary contractual terms. Parliament intended those provisions to protect employees from unfair dismissal and it had specified the consequences of a failure to comply. For all the reasons given in Johnson, it could not have intended that the inclusion of those provisions in a contract of employment would also give rise to a common law claim for damages, Johnson applied. In the absence of express agreement, the parties were not to be taken as having intended that a failure to comply with contractually binding disciplinary procedures would give rise to a common law claim for damages. The unfair dismissal legislation precluded a claim for damages for breach of contract in relation to the manner of a dismissal, whether formulated as a claim for breach of an implied or an express term. Parliament had not intended that an employee could choose to pursue his complaint of unfair dismissal in the ordinary courts, free from the limitations carefully crafted for the exercise of the statutory jurisdiction. That was not to say that an employer who started a disciplinary process in breach of an express term of the contract was not acting in breach of contract. He plainly was, and it was open to the employee to seek an appropriate declaration or an injunction to stop the process. An injunction to prevent a threatened unfair dismissal did not cut across the statutory scheme for compensation for unfair dismissal (see paras 23, 29, 37-40, 44, 49 of judgment). (2) Whether a case fell within the Johnson exclusion area depended on the fact-specific question of whether or not the loss founding the cause of action flowed directly from the employer's failure to act fairly when taking steps leading to dismissal and whether it preceded and was independent of the dismissal process. E accepted that his claim for unfair dismissal fell within the Johnson exclusion area. His claim for loss of reputation arose from the findings made by the dismissal tribunal, and B's arose from the dismissal itself. Neither could be said to be independent of the dismissal process and both fell within the Johnson exclusion area (paras 51, 55-61).
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