Ailbhe Dennehy: A cautionary tale for employers dismissing during probation

Ailbhe Dennehy: A cautionary tale for employers dismissing during probation

Ailbhe Dennehy

Ailbhe Dennehy, partner at William Fry, considers a significant High Court ruling concerning an employee dismissed during probation.

Traditionally, dismissals during probation have been considered relatively low risk by employers since the Workplace Relations Commission (WRC) requires employees to have at least one year’s service before taking a claim of unfair dismissal.

However, the courts’ focus on an employee’s right to fair procedures in recent cases challenging dismissal during probation should serve as a cautionary tale to employers. A lack of service does not afford employers carte blanche to side-step fair procedures.

Last month the High Court weighed in, confirming, in the case of O’Donovan v Over-C Technology Ltd & Another [2020] IEHC 291, that the employee’s implied contractual right to fair procedures had been breached when assessing his performance and subsequently dismissing him. 

What happened? 

In August 2019, Mr O’Donovan was appointed CFO of Over-C Technology Limited under a contract providing for remedial action/termination during the initial six month probation period where “performance is not up to the required standard” and the employee’s “right to lodge an appeal” in the event of any disciplinary action.

In January 2020, Mr O’Donovan was dismissed with immediate effect and paid in lieu of his one month’s notice. In the letter of termination, Over-C cited Mr O’Donovan’s “sub-standard” performance as grounds for his dismissal and specifically referenced Mr O’Donovan’s provision of “an inflated and, hence, misleading projected sales figure at a board meeting”. Over-C claimed, in the letter of termination, that Mr O’Donovan had been made aware of the performance issues prior to dismissal. 

Mr O’Donovan sought to assert his right to an appeal however, when the parties could not agree a proposed time for the appeal, the dismissal was confirmed.  Mr O’Donovan sought injunctive relief (amongst other actions), asserting that he was entitled to continue to be employed by Over-C or that his dismissal should be declared invalid, or both on the basis that the dismissal was a breach of contract as well as a breach of his constitutional right to fair procedures. 

What did the High Court decide?

Mr O’Donovan claimed that there was no notification of performance issues prior to his dismissal, he was not afforded an opportunity to appeal, there was inadequate notice to appeal, and his appeal was incorrectly deemed to have been withdrawn. Furthermore, Over-C’s disciplinary procedures were a breach of his express and implied rights under his employment contract. 

In reviewing the test for granting an injunction, the High Court considered that:

  1. Mr O’Donovan’s claim for injunctive relief met the first test of establishing a strong case likely to succeed at trial as Mr O’Donovan had made a strong case that his dismissal, while not wrongful on grounds of “misconduct”, was wrongful on the“significantly more probable” grounds of “poor performance during his probationary period” as it was not effected in accordance with Mr O’Donovan’s contract.  In reaching such conclusion, the Court noted that the instances of alleged poor performance were not drawn to Mr O’Donovan’s attention prior to his dismissal in January 2020 and in the “specific circumstances of his contractually required performance assessment”, Mr O’Donovan was entitled to a “level of procedural fairness that he did not receive”, particularly the right to be heard and the right to appeal.
  2. Mr O’Donovan’s claim also met the second test as to whether the balance of convenience favours the granting of an injunction including a consideration of whether damages would be an adequate remedy.  On the balance of convenience, the Court considered the potential impact to Mr O’Donovan’s reputation given his senior role within the business and the personal financial impact (in terms of his ability to pay his mortgage and family expenses) of not granting injunctive relief. Mr O’Donovan submitted that the reasons put forward by Over-C for his dismissal suggested that he had “deliberately misled the board and, hence, was dishonest and untrustworthy” which “in turn by innuendo” meant he was in breach of the Code of Conduct of the Institute of Management Accountants. However, the fact that the relationship of mutual trust and confidence no longer existed between the parties was a “weighty factor” in the High Court refusing to grant an order placing Mr O’Donovan back into the business “to resume his duties as CFO”. 

Ultimately, the High Court determined that the claim was “one of a fair termination process rather than one for reinstatement”. The High Court granted an interlocutory order requiring Over-C to pay Mr O’Donovan six months’ salary (in addition to benefits and any bonus) starting from the end of January 2020 on the condition that Mr O’Donovan would be available to Over-C to conduct CFO duties, if required. However, Over-C had the choice of assigning duties to Mr O’Donovan or placing him on a leave of absence and could appoint a new CFO as it saw fit. 

What should employers do?

A prudent employer should have regard to an employee’s right to fair procedures in any dismissal, including during a probationary period.

In addition to injunctive relief and notwithstanding their inability to bring an unfair dismissal claim before the WRC, employees with less one year’s service have several possible avenues of redress in the event of dismissal.

For example, there is no service requirement to take a claim for unfair dismissal where the dismissal is connected to a number of exceptions including pregnancy, trade union membership or where the employee is making a protected disclosure.

Separately, employees dismissed in breach of the Equality Acts and/or the Safety, Health and Welfare at Work Act 2005 can bring claims under those Acts.

Additionally, an employee can refer a matter to the Labour Court under Section 20(1) of the Industrial Relations Act. In the recent case of Beechside Company Limited T/A Park Hotel Kenmare v A Worker, the Labour Court awarded significant compensation of €90,000 via a non-binding Recommendation.

Here the employee had not been provided with reasons for the dismissal, no warnings were given in the lead up to the dismissal and the employee was not afforded the opportunity to respond. 

Employers are advised to strictly adhere to contractually mandated performance assessment procedures and ensure the employee in question is afforded full and fair procedures in advance of a decision to dismiss on grounds of poor performance.

Ailbhe Dennehy: A cautionary tale for employers dismissing during probation

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