No fault dismissal – here is what employers should know
Recent cases have highlighted the issues that can arise when an employer decides to let go of an employee by means of a “no fault dismissal”. The following article will explain what a no fault dismissal is, and look at two relevant cases.
If you are an employer who may be considering letting your employee go by means of a no fault dismissal, it is vital to understand your rights, and to avoid any legal battles that may arise.
What is a no fault dismissal?
A no fault dismissal is where an employer exercises their contractual right to dismiss an employee with notice, without following any procedures, and it is not based on the employee’s conduct or performance.
A no fault dismissal, if implemented correctly, should have the benefit of avoiding an injunction application by the dismissed employee, but opens the door to an unfair dismissals claim in the Workplace Relations Commission where the maximum compensation available is equal to two years’ remuneration.
The first case demonstrates how an employer misused the ‘no fault’ tool and the employee was granted an injunction restraining his dismissal. The second case highlights where the ‘no fault’ dismissal was implemented correctly and the employee was unsuccessful in his application for an injunction.
In the recent case of Jean-Phillippe Grenet v Electronic Arts Ireland Limited, Jean-Phillippe Grenet’s contract of employment was terminated on the basis of ‘no fault’ in accordance with the terms of his employment contract. However, Grenet brought a successful injunction retraining his dismissal. The facts in brief are as follows:
Mr. Grenet brought proceedings against his employer, Electronic Arts (Ireland) Limited, after he was dismissed in November 2018 for allegedly making an inappropriate comment in a one-to-one video call with another colleague. An injunction was granted restraining the employer from taking any step to implement the dismissal and from appointing another person to the role.
On 10 December 2018, the employer withdrew the initial decision to dismiss him and now claimed his employment was validly terminated on a no fault basis.
Mr. Grenet made a further application for an injunction on the basis of this second purported dismissal and the Court granted him the injunction agreeing that the no fault termination was “cloaked in new and relatively see through clothes” and was on the balance of probabilities “a cynical contrivance”. It was too late to try and disguise the termination of the contract as no fault.
This is an example of how companies should tread carefully, as the background to a no fault dismissal will be heavily scrutinised by the Court.
The case also looked at whether the person who had signed the no fault termination letter had the ostensible (apparent) authority to effect the dismissal. The Court did not make a binding determination on this point, other than to say that the Defendant company was incorporated in Ireland and that the company was therefore subject to Irish Laws in relation to directorships and the duties and obligations that follow.
Injunction not granted
In contrast to the above, in the case of Hughes v Mongo DB Limited  IEHC35, the Court refused to grant an injunction restraining the dismissal of an employee whose employment was terminated on the basis of a no fault dismissal.
Mr. Hughes asserted that the determination of his contract had been a breach of his employment law rights and was seriously damaging to his good name. The employer argued that Mr. Hughes’ employment had been terminated because they felt he was not a good fit for the company and he had not been dismissed by reason of having been found guilty of any misconduct or poor performance. The Court found that Mr. Hughes had failed to persuade the Court to grant the interlocutory injunction in this case.
The Grenet case ultimately settled on 6 February 2019, but it is clear from the case that it is in the interest of employers to exercise caution in effecting a no fault dismissal.
A consequence of a successful application for an interlocutory injunction restraining dismissal can be costly, time consuming and attract unwanted publicity. The employer may be ordered to continue to pay the employee’s salary and benefits in the interim and may be restrained from appointing a replacement to the role.
For more information on this topic, or to seek legal advice before effecting such a termination, contact O’Flynn Exhams Solicitors today.
Article by Sarah Coughlan, Senior Associate