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Court Of Appeal Raises New Issues When Overturning Injunction Of Dismissal During Probationary Period

Donal O’Donovan- And – Over-C Technology Limited And Over-C Limited Court Of Appeal Record Number 2020/148

Facts: This is an appeal against the decision of the High Court which had granted Mr Donal O’Donovan a limited injunction in respect of his dismissal during his probationary period. Over-C Technology Limited and Over-C Limited appealed this decision to the Court of Appeal and Mr O’Donovan lodged a cross-appeal in relation to the terms of the order made by the High Court and in respect of the order for costs.

Background:  Mr Donovan was appointed as the Chief Financial Officer for Over-C Technology Limited (the “Company”) on 6th August 2019, with a probationary period of 6 months. Mr Donovan took his annual leave from 13th December 2019 to 6th January 2020, and upon his return he was called in for a meeting with the CEO, Mr Elliot, on 7th January 2020, where he was informed of the termination of his employment with immediate effect and that he would be paid in lieu of his one month’s notice period. Mr Donovan further received a letter on 13th January, dated 8th January 2020, stating that he had provided inflated and misleading sales figures at the Board Meeting of 2nd December 2019 and had failed to answer a “basic cash position” question about the company, among other things and that his performance was sub-standard. Mr Donovan was availed of an appeals process, which was arranged by another Director of the Company on 16th January. Mr Donovan replied that the suggested time and date was not convenient for him or his legal representative. Mr Donovan then received a response from the said Director on 17th January confirming his dismissal.

Mr Donovan issued High Court proceedings seeking injunctive relief for wrongful dismissal. The High Court found that Mr Donovan had established a strong case that he had implied contractual rights to fair procedures for assessing his performance during his probationary period. He claimed that at no point was he communicated any issues regarding his performance and that the Company had breached this right to fair procedure when he was summarily dismissed. The High Court found in favour of Mr Donovan and granted an interlocutory injunction reinstating him into his employment and payment of his salary for 6 months from January 2020. However, Judge Keane noted that both parties had acknowledged that the relationship of mutual trust and confidence between the parties had irretrievably broken down. 

Appeal: The Company argued that the grant of the interlocutory injunction to reinstate Mr Donovan and to pay his 6 month’s salary because of an implied contractual obligation to fair procedures and natural justice was an error considering (a) Mr Donovan’s employment was already terminated at the time of commencement of proceedings; (b) there were no allegations of misconduct; (c) termination was within the probationary period of 6 months; (d) mutual trust and confidence between the parties had completely broken; and (e) trial judge found that the termination process was a fair one. The Company further argued that the trial judge failed to apply the common law principles that are applicable to termination of employment which permit termination with notice for any or no reason.

Decision: The Court of Appeal (the “CoA”) agreed with the High Court that the nature of the complaints fell far short of allegations of misconduct. Therefore, the appeal focused on whether Mr O’Donovan had established a strong case for an injunction restraining the termination of his contract of employment in circumstances where his dismissal was based on poor performance (rather than misconduct).

The CoA referred to the decision in Merck Sharp & Dohme Corporation v. Clonmel Healthcare Limited,[2019] IESC 65, in which O’Donnell J said that when considering an application for an interlocutory injunction , the court should consider whether the plaintiff can be granted a permanent injunction if successful, and if not, it is extremely unlikely that the same relief should be granted at the interlocutory stage. The CoA found that Mr O’Donovan was unlikely to obtain a permanent injunction even if he succeeded the trial.

The CoA held that the High Court had failed to give adequate weight to the fact that the termination occurred during the probationary period and deemed this to be “a crucial fact” in the case. It further emphasised that during probationary period, both parties are and must be free to terminate the contract of employment for no reason, as “this would negate the whole purpose of a probationary period”. In addition, Mr Donovan’s contract expressly provided that during the probationary period his work will be assessed and if satisfactory, the employment will continue and if his performance is not up to the required standard, the Company could terminate his employment.  The CoA noted that Mr Donovan was aware of the said term and signed up to the contract. The CoA also noted that the fact that the Appellant was also entitled to pay in lieu of notice period was not contested. 

The CoA held that an employee who is dismissed on grounds other than misconduct is not entitled to the benefit of the principles of natural justice or fair procedures. Therefore, Mr O’Donovan should not have been granted an interlocutory injunction. Furthermore, it held that as Mr O’Donovan had accepted that the relationship with the Company had irretrievably broken down, that he would not be granted a permanent injunction at the trial of the action and this would also prevent him being granted an interlocutory injunction.     

Issues arising from the Decision:

While the CoA’s decision gives welcome clarity in respect of dismissals during the probation period and injunctions in relation to performance related dismissals, it has raised some other questions in respect of the employment injunction.  In particular, the CoA was of the view that an application for an injunction should only be made before a dismissal and that the court has no jurisdiction to grant an injunction after the employment has been terminated. This could result in the courts having to get involved in internal procedures, which they have to date been very reluctant to interfere with such processes. The CoA decision in this regard appears to be contrary to numerous cases, including those of the Supreme Court. It may also question whether an employer is putting itself in greater risk of an injunction application if it goes through a process in cases of  misconduct.

Separately, the CoA selectively quoted Clarke J. (as he was then) in Carroll v. Dublin Bus when it alleged that the only remedy that an employee could get was payment in respect of reasonable notice. However, the CoA ignored the fact that Clarke J. in that case recognised that declaratory relief which made a dismissal void, automatically entitled an employee to the back-pay he would have received during that period.

Takeaway for the Employers:

This decision highlights the importance of a properly drafted probationary clause which does not provide for fair procedures during the probation period. It also clarifies that an injunction should only be granted where it relates to misconduct. However, there is often a fine line between what is misconduct and what is performance related which employers should be mindful of.

Authors – Anne O’Connell & Chaitra Girish Mallya

16 February 2021

Anne O’Connell Solicitors

19-22 Lower Baggot Street, Dublin 2

www.aocsolicitors.ie

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