Wrongful dismissal? The Johnson exclusion area

The downturn in the economy, which we have experienced in the last few years, has had a number of consequences, including increasing job uncertainty and a corresponding increase in employment law matters.  

Concerns have been expressed about the system of dealing with labor law disputes under the existing legislation, including the attempt by some lawyers to bring employment disputes before the Grand Court rather than before a Labour Tribunal. Such an attempt was made in the case of Hemmings v. PMC Limited (Trading as Chrissie Tomlinson Hospital) [2013 (1) CILR 254] (“the Hemmings case”).  

In the Hemmings case, a nurse who had been summarily dismissed by her employer for leaving her post without permission, chose not to file a complaint with the Labour Tribunal but to instead issue a writ in the Grand Court seeking remedies for wrongful dismissal and breach of the implied term of trust and confidence.  

The nurse argued that she had in fact received permission to leave her post and that her employer had not followed recognized disciplinary procedures. The employer sought to strike out the action. The matter came before Justice Williams on Feb. 6, 2013.  

At the hearing, the plaintiff conceded certain parts of her claim and so the case proceeded upon two claims as follows:  

  1. Wrongful dismissal due to a failure to follow a proper disciplinary process; and  
  2. Breach of the implied term of trust and confidence.  

The argument relating to wrongful dismissal involved an analysis of certain leading cases in the U.K., most notably: Johnson v. Unisys Ltd. [2001] UKHL 13 (“Johnson”), Edwards v Chesterfield Royal Hospital NHS Foundation Trust [2011] UKSC 58 (“Edwards”), and Botham v Ministry of Defence [2011] UKSC 58 (“Botham”).  

In this line of cases it had been argued that where an employee had suffered “stigma” from the nature of the dismissal and the procedure resulting in the dismissal had been unfair, damages could be obtained from the court.  

In all three of these cases the House of Lords had decided against the employees. So too with the Cayman case of Roulstone and Coffee v. Cayman Airways Limited [1992–93 CILR 259] where Justice Schofield held, inter alia, that the Grand Court did not recognize unfair dismissal as a cause of action.  

The reasoning involved is complex, but Justice Williams appeared to base his decision primarily on the judgment of Lord Hoffmann in Johnson, and in particular on Lord Hoffmann’s comments that it was not the intention of Parliament to set up a parallel system for dealing with employment disputes. The whole rationale for enacting employment disputes legislation was to provide a procedure which was swift and economic.  

In the Cayman Islands, the equivalent to the employment dispute legislation in England is the Labour Law, under which the complainant files a complaint alleging “unfair dismissal” with a Labour Tribunal. In his judgment, the judge noted the defendant’s arguments relating to the shortcomings of the Cayman Islands system of dealing with employment disputes under the Labour Law but followed Lord Hoffmann’s reasoning that the Cayman Islands government had provided a system of law for dealing with employment law disputes and he could not interfere with their jurisdiction.  

On that basis the wrongful dismissal claim failed. Counsel for the defendant contended that the plaintiff was attempting “to dress up an unfair dismissal complaint as a contract complaint and thereby circumvent the statutory provisions limiting rights of action in unfair dismissal cases.”  

In the second limb of her claim, the plaintiff sought damages for breaches of the implied term of trust and confidence.  

The judge cited with approval the Addis v Gramophone Limited [1909] A.C. 488 case, which held that compensation for wrongful dismissal does not include the manner of the dismissal, injured feelings or the loss sustained from the fact that the dismissal itself makes it difficult for the employee to obtain future employment. None of the employees in the Johnson Line of cases were found to have suffered stigma damages.  

The judge again referred to the Johnson case and to the case of Malik v BCCI and Mahmud v BCCI [1998] A.C. 20 and stated that “the majority decision makes it clear that the “Johnson exclusion area” which prevents contractual claims for the manner of dismissal, applies irrespective of whether the claim is based on breach of implied term or the express contractual term.” The Johnson case rejected the Malik approach.  

This is the first case in the Cayman Islands Grand Court where the Johnson exclusion area has been contested. It was clear that the judge found the case to be of persuasive authority and decided to follow the Johnson decision.  

It may well be the case that the Labour Law of the Cayman Islands needs revision and updating. Previous governments have given consideration to deep-rooted changes to the bill, an Employment Law being one such example.  

As the Labour Law presently stands, the basic terms of a contract of employment are to be found at section 5 and do not provide for any disciplinary procedures to be included in contracts of employment.

Nevertheless, most employers do provide for disciplinary procedures in their contracts of employment and in their handbooks and manuals. It would certainly appear to be best practice to conduct a proper investigation into allegations made against employees especially in cases of gross misconduct, where the employer may consider summary dismissal.  

We will have to await further developments on this topic, but perhaps the question is: will the next development in this area come from the courts or the government?