No-fault Dismissals In Ireland: What Employers Need To Know

What is a no-fault dismissal?

The High Court has again acknowledged that a no-fault dismissal, meaning termination without cause, is permitted in law, provided there are no underlying reasons such as misconduct issues, and the necessary contractual clauses are in place.

When misconduct triggers fair procedures

Mr Justice Dignam made the following comments in the recent decision of Buttimer v Oak Fuel Supermarket Ltd [2023] IEHC 126

“An employer is free to terminate an employee's employment for no reason during probation, and even where it relates to poor performance, the employer is not obliged to observe fair procedure, but where the termination is for misconduct, fair procedures must be observed.”

The Court found that Ms. Buttimer had been dismissed from her employment due to allegations of misconduct and not for "performance-related issues" as contended by her employer. Therefore, she should have been afforded fair procedures as required by the Constitution and the Common Law. This is not the case where the termination is for no reason or for poor performance.

Two principles from O'Donovan

This reflects the position taken by the Court of Appeal in the 2021 case of Donal O'Donovan v Over-C Technology Limited, whereby the Court of Appeal overturned an injunction granted to an executive on probation whose employment had been terminated on the basis of poor performance during his probationary period. The Court of Appeal in that case re-stated two clear principles as follows:

Firstly: that an employer can terminate employment for any reason, or no reason, provided adequate notice is given. This applies whether or not the dismissal occurs during the probationary period.

Secondly: that the principles of natural justice apply to cases involving dismissal for misconduct but not to termination on other grounds.

What are the risks of proceeding on a no-fault basis?

The above being the case, proceeding to termination on a no-fault basis is not without risk, particularly where there are disciplinary matters or underlying performance issues.

Below, I have set out the risks to be considered.

Unfair dismissal

Generally, an employee cannot bring an unfair dismissal claim unless they have 12 months continuous service. This is subject to certain limited exceptions (for example, there is no service threshold for dismissal relating to pregnancy, trade union membership, making a protected disclosure under the Protected Disclosures legislation and other stated grounds). 

In addition, there is no service threshold to bring a discriminatory dismissal claim on the grounds of their race, sex, sexuality, age or any of the other discrimination grounds.

Under 12 months service

So we can say that if an employer proceeds to terminate on a no-fault basis, an employee is likely to fall outside of the scope of the Unfair Dismissals Acts unless they have 12 months continuous service or one of the above exceptions applies. 

To mitigate the risk of a discrimination claim, it would be worthwhile exploring any potential grounds for discrimination and, where a reason is being provided, to document the non-discriminative, objective basis for the no-fault dismissal.

Over 12 months service

Where the employee has in excess of 12 months continuous service, and they are dismissed on a no-fault basis, they will be afforded the protections of the Unfair Dismissal legislation. In that situation, it will be difficult for an employer to stand over this type of dismissal in the absence of fair procedures and natural justice. 

In fact, the burden will be on the employer to prove the dismissal was fair. It is important to be aware that the maximum compensation which can be awarded for an Unfair Dismissal claim is 2 years gross remuneration and 5 years gross remuneration where to the dismissal arises from the making of a Protected Disclosure.

Recommendations

An employee dismissed on a no-fault basis can seek a non-binding Recommendation from the Workplace Relations Commission (WRC) under the Industrial Relations Act, 1969. This is the route usually taken when they fail to meet the service requirement under the Unfair Dismissals Acts. 

An employee can ask the WRC/Labour Court to examine their case and determine (by way of a non-binding recommendation) whether they were fairly dismissed or not. 

The approach of the WRC/Labour Court tends to focus on fair procedures – including representation in disciplinary meetings before they were dismissed. Typically, the WRC/Labour court finds that they do, but where the employer objects in a timely manner to being bound by the decision, the ruling will be non-binding. 

In certain sectors (e.g. public sector organisations), there may be a tendency to observe WRC/Labour Court rulings, but this is not obligatory.

Wrongful dismissal / Injunctive relief

Lastly, there is a claim for wrongful dismissal, which means dismissal in breach of contract, and can only be litigated in the Courts (the Workplace Relations Commission has no jurisdiction). 

An employee can, in theory, bring a wrongful dismissal claim even during the first year of continuous service – but such claims are difficult for employees to win, particularly in cases of termination during probation where the contract expressly permits dismissal without cause.

Senior employees and injunctions

Wrongful dismissal claims tend to be confined to high-level executive roles with high salaries. An employee typically brings a wrongful dismissal claim in the first year, if they can establish that (i) they were entitled to fair procedures prior to dismissal (such as within a disciplinary process) but (ii) the employer did not afford them those fair procedures.

When Courts refuse injunctive relief

Applying to the Courts for injunctive relief for wrongful dismissal is generally a less attractive route for a dismissed employee in view of the time and very significant expense required to take this type of action. The Courts have also shown an unwillingness to grant injunctive relief to restrain a no-fault dismissal. 

This was the case in Bradshaw v Murphy 2014, where the High Court refused to grant an injunction to restrain a no-fault dismissal of a chef/restaurateur - despite allegations of misconduct which had not been investigated. In that case, the employee had failed to meet the high bar required to secure such an injunction, namely, he had not established that:

1. there is a serious issue for trial;
2. damages would be an inadequate remedy;
3. the balance of convenience lay in favour of granting the injunction.

When Courts grant injunctive relief

An employee will have a greater prospect of being granted injunctive relief where they have grounds to demonstrate that there was a reason for the dismissal, such as poor performance or misconduct.

Essentially, in such a scenario, an employee would apply to the Court seeking their rights to fair procedures so that they can address, what are in their view, the clear unaddressed disciplinary issues prior to any dismissal being affected. 

It is key that there are no live or ongoing formal disciplinary matters. The cases where employees have secured injunctions for no-fault dismissals have tended to involve scenarios where a disciplinary process was started, dropped and then replaced by a no-fault dismissal.

Grenet: When a no-fault dismissal followed a dropped process

This was the case in Grenet v Electronic Arts Ireland Limited, whereby Mr. Grenet was dismissed for allegedly making an inappropriate comment on a call with another colleague. The dismissal was subsequently withdrawn, and it was claimed that his employment was validly terminated on a no-fault basis. Mr. Grenet brought a successful injunction restraining his dismissal.

O'Donovan: limits on injunctive relief during probation

In the O'Donovan case mentioned above, the Court of Appeal overturned the High Court's decision and limited the circumstances in which the Court will interfere with a dismissal and grant an injunction. In that case, the employee's poor performance was brought to his attention, and the company terminated his employment with immediate effect and confirmed that the employee would be paid in lieu of notice. 

The employee issued injunctive proceedings in the High Court seeking to be immediately re-instated into his role and preventing the appointment of any other person into his role. The High Court granted an injunction directing that the employee be re-instated.

What the Court of appeal confirmed

The Court of Appeal decision overturned that decision and helpfully removed the uncertainty created by the High Court's original decision. The Court of Appeal acknowledged the following:

1. It was accepted that the dismissal during probation was for poor performance, not misconduct.
2. The contract of employment included an express clause which permitted termination during probation for no reason.
3. The Court refused to imply a right to fair procedures into a contract.
4. The employee was dismissed pursuant to an express contractual term which entitled the employer to dismiss him if his performance was substandard.
5. The employee was appropriately paid his notice.

The Court helpfully commented that the trial Judge had failed to properly consider the fact that termination occurred during the probation period. The Judge commented, 

"During a period of probation, both parties are – and must be – free to terminate the contract of employment for no reason, or simply because one party forms the view that the intended employment is, for whatever reason, not something with which they wish to continue".

Performance or misconduct or both

In the Buttimer case mentioned above, the Court noted that certain behaviour can be both a performance issue and a misconduct one and that both are not mutually exclusive. Where dismissal is really about misconduct, fair procedures must still be observed.

"I have no hesitation in concluding that the type of behaviour which is alleged against the plaintiff amounts to misconduct and would be understood as such by reasonable persons. The mere fact that it might also be considered as a performance issue does not preclude it from being misconduct".

The Court found that the reasons for the dismissal were for allegations of workplace bullying and harassment – misconduct – so fair procedure should have been afforded. Therefore, two interlocutory orders were granted: 

1) restraining the company from replacing Ms. Buttimer and 

2) restraining the Company from publishing or communicating to any party that the employee was no longer employed pending the outcome of the full trial.

It is very important that the reasons and perceived reasons are considered in detail before any decision is made around termination.

Practical steps before a no-fault dismissal

The net result of these decisions is that the number of employees seeking injunctive relief from the Court will be restricted to circumstances relating to misconduct in which no fair procedures are used. 

However, the Court will examine in detail whether there are underlying reasons underpinning the no-fault dismissals and whether these reasons are solely performance or whether there is a misconduct element to them.

It is also important to point out that this rational applies whether or not dismissal occurs during the probationary period. Further than that, it is possible to dismiss for poor performance without a requirement to use fair procedures. However, the application of the Unfair Dismissals Acts should always be considered.

Where the dismissal relates to misconduct issues, fair procedures should always be applied.

We would recommend the following be considered when exploring dismissal of a poorly performing employee on a no-fault basis:

1. Where the employee is still within their probationary period or has under 52 weeks of service, before moving to a termination, ensure the contract of employment, particularly the probationary clauses, contains scope to terminate the contract for no reason.
2. Where the employee has in excess of 52 weeks' service or falls into one of the exceptions, a performance improvement plan should be considered in line with company policies and procedures and, depending on the outcome, a dismissal thereafter.
3. Termination in circumstances of misconduct, even during probation, should be conducted in line with the Company's disciplinary procedures and fair procedures / natural justice. This does not necessarily have to be the full disciplinary policy, but can be an abridged version.

No-fault dismissals: What employers should take away

While no-fault dismissals are possible, they are notoriously difficult to stand over and justify. 

Employers should carefully assess whether there are underlying issues motivating the dismissal – notwithstanding the label of a no-fault dismissal – and the nature of the issues – whether there is a misconduct or performance element to them. 

Prudent employers will ensure they obtain employment law advice before moving towards a no-fault dismissal.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.