There are both statutory claims and contractual claims.
Where the director also holds the status as an employee of the Company, he benefits from a statutory unfair dismissal claim if he has more than 2 years of continuous service with the Company.
Continuous service is not required if the director’s engagement is terminated for an inadmissible reason – such as on the grounds of age, sex, religion or disability.
An unfair dismissal claim will succeed if the director can satisfy the Employment Tribunal that his dismissal was either substantively or procedurally unfair.
The law, however, is very much pro-employer. The Employers should be able to successfully defend the claim if they acted fairly and carried out reasonable procedural termination steps.
However, it is not uncommon for Employers to act without taking legal advice or to deliberately remove a director in an unfair manner- being willing to take their chances in subsequent legal claims. Therefore, the situation is not always one-sided in favour of the Employer.
A director can raise a formal grievance If he is aggrieved at a situation, such as being placed upon performance management or if his job functions are taken away, or if he has other reasons to raise a complaint. He is also able to defend allegations against himself.
This includes requesting sight of all of the investigatory material, making written representations and calling his own witnesses/presenting his own evidence at the disciplinary hearing.
A difficult scenario arises where the disciplinary proceedings are not being conducted fairly and it appears clear that the Company has every intention of dismissing a director upon alleged grounds of gross misconduct. This will make the re-engagement of the director by another company very difficult, if not impossible – especially if the director carries out his work in the financial services industry or other regulated fields of activity.
In this situation, the director has the choice of considering whether to resign his employment- to prevent a dismissal occurring upon grounds of gross misconduct- and to subsequently raise a constructive unfair dismissal claim.
This is a difficult legal situation, and detailed legal advice should be secured as to exactly what to do.
This generally consists of financial compensation in the form of a basic and compensatory award.
The basic award is the same as a statutory redundancy payment- and is generally of relatively modest value to the relatively low statutory maximum amount of a week’s pay.
The compensatory award also has a (more realistic) statutory maximum but is limited to one year’s loss of earnings.
The loss of earnings is awarded net of tax up to £30,000, and gross for sums in excess of that amount. (Awards are generally tax-free up to £30,000).
A director has to take reasonable steps to mitigate his loss i.e., to find an alternative source of income- both permanent and temporary. This hurdle is usually not too difficult to comply with- subject to diary notes being compiled of attempts to find new employment and copy paperwork/emails in relation to this being retained.
However, companies may not be too worried in dismissing a director, upon the basis of duty to mitigate, if they believe that the director will secure an alternative position fairly quickly.
A claim may be made for the continuing loss of remuneration package, where the new position is not so well remunerated.
The value of both contractual and non-contractual fringe benefits, such a discretionary bonuses, may be also claimed in unfair dismissal proceedings.
Credit will need to be given against the compensatory award in relation to earnings from any new employment.
A reduction in an award may be made by the Employment Tribunal on grounds of contributory fault or on just and equitable grounds.
A detailed schedule of loss is usually required to support an unfair dismissal claim- and is also very useful in the support of pre-action settlement negotiations.
This is a claim brought when you are at a disadvantage based on a characteristic often referred to as a “protected characteristic.”
Any worker, including directors, are protected under the Equality Act 2010 against discrimination.
Such characteristics include but are not limited to age, sex, disability, race, religion, etc
There are no financial limits upon a discrimination claim- unlike an unfair dismissal claim. Interest can be claimed as well. The Tribunal also has the power to award a sizeable sum for injury to feelings.
Set out below, there are the current bands for injury to feelings awards, which is based upon the seriousness of the discrimination in question – in a general situation a case will fall within the middle band:
Bottom Band – £600 – £6,000
Middle Band – £6,000 – £18,000
Top Band – £18,000 – £30,000
This is when the director is dismissed for bringing to attention a wrongdoing on the part of the company. The director must have followed the protocol of the company and brought the wrongdoing to the attention of a designated manager or officer of the Company. If he feels that this cannot be done, then he should endeavour to contact a prescribed body.
The law upon whistleblowing is complex and there is no space in this note to recite the detailed provisions and complexities. Please contact us for specific advice to your circumstance.
Wrongful dismissal is a notice pay claim – this is a claim for the value of salary and benefits during the directors’ contractual notice period of his employment or that will be implied as being reasonable notice if no period of notice has been agreed.
For a senior manager or a director, it is possible to argue for such reasonable implied notice to be 3 or 6 months.
Other contractual claims include unpaid commission or an unpaid contractual bonus which has become due or the unpaid holiday pay which has accrued.
These are statutory-based agreements under which the director/employee resigns his employment and/or settles all of his employment-based claims in consideration of an agreed sum of money.
The draft agreement presented by the Company is generally one-sided and commercially unacceptable to sign. These contain many (unfair) covenants on the part of the employee/director, which, if broken, will result in the settlement money being forfeited or being liable to be repaid in full.
We are very experienced in representing directors and managers in the negotiation of settlement agreement packages and terms. This includes negotiating the agreement to make it commercially acceptable, negotiating the waiver of any non-compete covenants, arranging the purchase of any shares, dealing with any share options, and the provision of an agreed reference. The employer’s contribution towards costs, which is a usual feature of such agreements, is often negotiable, especially in this scenario.
Please click here or call 0208 446 6223 or email enquiries@sr-law.co.uk for assistance from our experienced team.
