Termination of Employment at Common Law



The law will operate to end employment relationship on the happening of particular event.

No liability on either side

  • No dismissal = no liabiility (unfair or wrongful dismissal)
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Modes of termination

Employment Rights Act 136 

Deatth or dissolution of enterprise

Death brings contract to an end

Employee is discharged from further performance on death of employer as result of implied condition that the continued existence of parties is essential to contract

Partnerships - if partner dies and there is dissolution of partnership, contract will be discharged

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Frustration of contract

Terminated automatically if frustrated

if change of law or circumstances makes contract impossible to perform or makes performance radically different from original

  • No fault of any party


Principle: no need for employer to take any steps to terminate contract or even ti indicate it is terminated.

No right to back any pay from date of frustration until any other date

Frustation = termination due to operation in law

Illness & imprisonment

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Frustration by illness

Event must be exceptionally grave

On part of employee if it is sufficiently grave to frustrate contract

  • employee lose rights to claim unfair dismissal or redundancy


Facts: ill opera singer - could not take part in first 4 performances

Held: frustrated contract - contract was treat as ended

For theatrical cases care may be needed

  • court may be more ready to find frustration in short-term contract

More difficult to establish in case of longstanding permanent employment 

  • consideration for wage is readiness and willingness to serve, not performance of work
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Frustration by illness (2)

Marshall v Harland & Wolff

Factors to tribunal deciding frustration of contract:

(1) Terms of contract

(2) How long employment was likely to last without sickness

(3) Nature of employment - need for replacement

(4) Nature of illness, prospects of recovery

(5) Period of past employment - relationship of longstnading is not so easily destroyed as that of a short one

Tribunal has to ask whether nature of incapacity was such that further performance of his obligations was impossible

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Marshall v Harland & Wollf Guidelines

These guidelines are sometimes not followed by tribunals


Issue: Guidelines raised difficulty in short-term periodic contracts which may be determined at short notice

In short term contract, employer has more ready dismissal on short notice - may be more appropriate than relying on frustration

In the case of illness there are further matters than in Marshall:

(6) Risk to employer of incurring obligations to employee meant to be replacement

(7) Whether wages have continued to be paid

(8) Acts and statements of employer

(9) Whether reasonable employer could be expected to wait any longer

If contract not frustration and employer has dismissed employee, claim for unfair dismissal may proceed

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Marshall v Harland & Wollf Guidelines (2)

When the guidelines are not followed:


Facts: W employed by L as part-time typist - 1986 injured her leg and submitted med certificates for absence - indicated she should not longer work for further two months from Dec - did not present fit to work until over a year later - told there was no work for her

Held - Test for frustration was whether performance would involve fundamental or radical change from obligations originally undertaken


Facts: H - 1/2 night service fitters employed by M Co - absent with dermatitis - April 1974 - M Co appointed permanent replacement - H presented for work in Jan 2 year later - told there was no work for him - dismissed.

Held - Terminated by frustration - continued acceptance of med certificates was not inconsistent with frustration - relationship continued on casual basis

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Frustration by imprisonment

General rule: frustration only possible where frustrating event has not arisen through fault of one of the parties, and is not normally imprisoned parties own fault he is serving prison sentence

Does imprisonment constitute as 'self-induced frustration'? - frustration usually must not be self induced.


Held: contract automatically terminated when employee sentenced to 12m imprisonment

  • frustrating event was imposition of sentence (not his crim behaviour)

Imprisonmeny can be frustration because to hold otherwise would allow party to benefit from his own wrongdoing. 


Facts: concerned UD - apprentice lost employment when sentenced to borstal training

Held: imprisonment can frustrate contract

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Termination by mutual consent

If parties mutually agree contract should end, neither party has terminated agreement - no dismissal or resignation

Genuine agreement = no issue

Has agreement been brought by employee pressure?


Facts: employee given notice to terminate employment - during notice period asked if he could leave a week earlier - employer agreed - employee claimed redundancy & UD - employer argued no dismissal because it had been terminated by mutual consent on 12th April.

Held: merely was agreement to vary notice period - employee still dismissed by employer

S95(2) Employment Rights Act - where employee under notice gives employer notice he wishes to leave before expiry date of employer's notice, employer deemed to have been dismissed for UD purposes

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Termination by mutual consent (2)

Termination by mutual consent is still possible.


Held: termination of employment from failure to return on time from holiday (when employee who had been late back before had agreed he would be terminated in event of lateness), was held not to have been terminated by mutual consent but repudiatory contract leading to dismissal

Financial consideration - tribunal more prepared to accept genuine agreement


Facts: Employees took voluntary early retirement - already under notice of dismissal for redundancy

Held: mutual agreement to terminate

Mutual termination during current notice period would only be found in a 'very rare case'

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Where employee terminates contract there is a resignation

If employee accepts repudiatory breach of contract by employer and terminates, if he has less than 2 years continuity of employment he may only claim damages for breach

Words clear and unambiguous


Facts: S was solicitor office manager - relationship with senior partner F deteriorated - following a meeting she said "i am resigning" - thanked immediately for her services - attended work next day - told she had resigned

Held: words shown intention to resign - no dismissal


Facts: S security officer - informed he was suspended after money found to be missing - S said he was 'jacking the job in' - employer treated S as resigned

Held: where exchange was ambiguous and made in heat of moment - employee should hold he has not resigned - on facts this could not be taken as resignation

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Resignation (2)

If words are ambiguous - test is that of a reasonable employer & interpretation of employee's intention

If employee given option of resigning or dismissed and chooses former, treat as dismissed at law


Facts: R employed by respondent company since 1979 as cash transit officer - K joined company in 1970 as vault officer - employment of both terminated - result of investigations by company into missing money - failed to follow company procedure checking money containers - option of resignation or dismissal

Helds: applicants were dismissed even in form they had resigned - forced to choose between resignation or instant dismissal 

If employee chooses to resign for other reasons e.g. to avoid disciplinary procedures - this is resignation not dismissal


Held - EAT wrong to conclude employee resigned - in course of a meeting he negotiated terms of departure after being told he would be dismissed

For resignation to be effective it must have ascertainable date

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Common law dismissal

Termination by employer with or without notice

Employee may be able to claim UD or sue for wrongful dismissal at common law

Common law = termination is dismissal

What action by employer is deemed to show intention to terminate contract?

Ambiguous words:


Facts: F fish filleter on Hull dock in B's employer - told during argument "if you do not like the job **** off" - F took this as dismissal and found other employment

Helds: words used must be construed against background of fish dock

  • formal bad language usually used in this trade when dismissal involved - F was not dismissed
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Common law dismissal

Ambiguous words (cont)


Facts: applicant employed by respondent company as builder - circumstances of incident when one pay day did not receive money owed to him - was told "if you are not satisfied **** off" - left work immediately - brough UD proceedings & never returned to work

Held: no dismissal - employee terminated own employment by leaving on his own accord

Type of industry & employee is relevant

In some cases, swear words will be dismissal - swear words may be basis for claim of constructive dismissal - breach of implied duty of mutual respect

"You're fired" "Collect your cards" "you are dismissed" - constitute dismissal

Tribunal consider circumstances in which words were spoken to find intention of employer

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Common law dismissal


Facts: T told not to use company van outside work - lent money to buy car - T found using van outside work - employer said "you're finished with me"

Held: words spoken in annoyance - not dismissal


Facts: M transport manager - obtained wrong part for broken down care - angry exchange took place between director & M - M dismissed but minutes later this got changed to suspension for 2 days

Held: no dismissal when words are spoken in heat of moment and retracted promptly

  • either party should be given opportunity of retracting from words spoken in heat of moment
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Dismissal with notice

Termination by employer should occur with notice

Notice required foind in contract OR statutory periods

  • S86 Employment Rights Act - provides stat notice periods

if contract gives greater rights than statute, contract prevails 

Stat term only applied if contract is silent on notice period

Notice must be definite and explicit


Facts: notice of termination given to P's union but not him personally - not effective to dismiss him

Amount of notice must be made known to employee - mere warning of dismissal will not constitute

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Wages in lieu of notice

Situation in which contract will terminate before expiry of notice

Employee accepts payment in lieu of notice, contract terminates immediately on pay receipt

Wages in lieu - employer gives employee wages he would have earned during notice period - instructs him not to work out notice period - rid of employer immediately


Principle: employee has no right to work out notice period where employer chooses to pay sum of wages in lieu

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Garden leave & other restraints during notice

In garden-leave situations, provide for long periods of notice on either side - employee will be remunerated but not required to work

May be imposed by injunction


Principle: court will not imply garden leave clause in case where it is arguable that employye has interest in doing work, not just receiving payment

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Dismissal for cause (Summary dismissal)

Employees conduct may justify dismissal w/o notice - employer will not breach contract

Depends on context & nature of reason


Facts: Manager of betting shop - took £15 from till and put IUO for amount taken - returned £15 next day but dismissed without notice

Held: even if conduct was not dishonest, employer entitled to dismiss him summarily on account of it

  • employer may summarily dismiss employee whos conduct has been inconsistent with his duty to the employer

The test: vary with nature of business and position held by employee

Serious breaches will justify dismissal without notice & refusal to obey reasonable order & gross neglect

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Dismissal for cause (Summary dismissal) (2)


Facts: R employed as nightwatchman - absent for 2 hours a night from building he was guarding - dismissed

Held: to leave building unattended was misconduct to justify summary dismissal

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Gross misconduct


Held: company entitled to dismiss employee who failed to comply with formal instruction to report all risks that could be threat to company's profit

Sometimes can be build up events which on their own would not be enough to constitute a summary dismissal


Facts: D's wife engaged plaintiff as head gardener - P's work became less satisfactory, conduct was lacking - P refused to do a job asked by wife and said he could "not care less" about the garden - summarily dismissed

Held: conduct amounted to repudiatory breach - disobeyed lawful & reasonable order - dismissal was justified

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Reason for dismissal

Law does not require employer has fair reason for dismissing employee

Only if he has been summarily dismissed, gross conduct must have occured

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Wrongful dismissal

Essentially action for breach

Procedural term of employment contract e.g. notice provision, has been breached

Can involve breach of term relating to permissible reasons for dismissal in rare instance where contract specifies such reasons

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Remedies for wrongful dismissal


employment contract is personal - two parties agree to provide personal services for eachother

Given that the contract is unique to the two parties, court cannot force parties to continue contract should they no longer do so

S236 Trade Union and Labour Relations Act


Facts: manager of manufacturing company - agreed to give during term "whole of his time to company's business"

Held: company not entitled to injunction to restrain manager from giving part of his time to rival company

If injunction will have effect of specific performance it will compel parties to continue contract - will not be granted

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Measure of damages limited to amount of notice he would have received had contract been adhered to

No account taken of manner of dismissal

Damages for breach should reflect actual loss sustained


Principle: where servant wrongly dismissed from employment, damages for dismissal cannot include compensation for manner of dismissal, injured feelings or loss he may sustain from the fact that dismissal makes it difficult for him to find new employment 

Extra damages may be claimed where contract envisages more than merely pay, e.g. publicity or reputation

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