Injunctions: Termination of employee during probationary period

by

O’Donovan -v- Over-C Technology Ltd & ANOR [2020] IEHC 291

Introduction
On the 12th June 2020, Keane J granted a Fennelly Order as part of an interlocutory injunction application, in favour of Mr. O’Donovan [“the Applicant”] following his summary dismissal on the 7th January 2020, by his former employer, Over-C Technology [“the Company”].
As a result of this order, the Company was required to pay the Applicant 6 month’s salary pending the outcome of the eventual trial regarding said dismissal. The Court found that the Company had failed to give recognition to the Applicants right to fair procedures and natural justice, despite the fact he had less than 6 months service.
Whilst a claim for unfair dismissal traditionally requires an employee to have 12 months service, this case serves as an important reminder that dismissals during a probationary period are not risk free and must be carried out in line with the requirements of natural justice.

Background
The Applicant commenced his role with the Company in July 2019 as the Chief Financial Officer [“CFO”]. Conditional to his appointment, the Applicant was required to satisfy a 6-month probationary period as per his terms of employment. If the Applicant failed to meet requisite standard expected by the Company during the period, the Company reserved the right to take any “remedial action”, up to and including termination of his employment. In the event that the Applicant was to be terminated, he would become entitled to 1 months’ notice. As a side note, the Applicants probationary clause made no reference to the manner or procedure that the Company was required to take when giving effect to this type of dismissal. Whilst his contract referred to a “scant” disciplinary procedure, the Court noted that there was no link between the probationary clause and rights and principles contained within disciplinary policy.
Following his return from annual leave on the 6th January 2020, the Applicant was invited to a meeting with the Mr. Michael Elliot, the Chief Executive Officer [“CEO”] scheduled for the following day. At this meeting, the Applicant was informed that he was to be terminated in accordance with his probationary clause. As per the decision letter, it was outlined to the Applicant that the reason taken for this decision was due to the fact that his performance was deemed to be substandard. In supporting this decision, the Company listed several examples, such as failure to be adequately prepared for a board meeting, failure to answer a routine question regarding the Company’s cash position and the provision of misleading and inflated projected sales figures.
Following his dismissal, the Applicant emailed the CEO noting that the Company failed to provide him with a right of appeal, as provided for in the Company’s disciplinary policy. On the 14th January 2020, the CEO replied and confirmed that an appeal hearing would be taking place on the 17th January. However, the Applicant did not attend the hearing as he claimed to only have received the invitation the night before and noted that his legal representative was unavailable for same.
On the 17th January 2020, the Company wrote to the Applicant and confirmed that due to his failure to attend the meeting, the decision regarding his dismissal was to stand. The Company informed the Applicant that he was also to be paid in lieu of his one months’ notice.
On the 31st January 2020, the Applicant applied by way of an ex parte application seeking a number of interlocutory reliefs. By virtue of the application made, the Company were required to provide an undertaking to the Court not to appoint anyone to the Applicant’s former role pending the determination of the present application.

Injunction Claim
As part of his claim, the Applicant contended that the Company breached his contract of employment by terminating his employment on the basis of substandard performance, without notifying him of this concern and/or engaging in a performance assessment, thus contravening his right to fair procedures and natural justice. More specifically, the Company had breached both his express and implied terms of his contract of employment by:

(a) effecting his dismissal before affording him an opportunity to appeal;
(b) failing to provide him with adequate notice of the arrangements for the conduct of the appeal, once that entitlement was conceded after his dismissal; and
(c) wrongly and unreasonably deeming his appeal to have been withdrawn when informed by him that the arrangements they had unilaterally made for it were not convenient.

Whilst attempting to rebut this, the Company noted that the Applicant breached the trust and confidence of the employee – employer relationship by unlawfully disclosing confidential commercial information to a third party.

Crux of the matter?
The Applicant pleaded that the reasons provided to him upon termination were akin to that of misconduct rather than performance and therefore should have been afforded the benefit of the disciplinary procedures, including that of an appeal. The Company rejected this position and noted that his dismissal related solely to the ground of capability, thus falling within the remit of the probationary clause. The Applicant noted that if such was the case, at no time during his employment was he ever informed of any issue regarding his performance nor was he afforded any adequate opportunity to address the alleged shortcomings identified on 7 January 2020 and in the letter of termination.
Whilst there was no contractual right to an appeal, the Company noted that the Applicant was afforded one as a matter of “courtesy”. The Court then turned to whether the Applicant was dismissed properly in accordance with his contract of employment? In the absence of evidence regarding his apparent substandard performance, the Court felt he had established a strong case, likely to succeed at trial. The Court also noted that if the Applicant was able to show that the disciplinary procedure and appeals process was linked to the probationary clause, he would have a stronger claim. Notwithstanding such, the Court felt that if the basis of his dismissal was performance related, he was nonetheless entitled to a level of procedural fairness, in terms of his right to be heard and a right of appeal.
However, the Court acknowledged that there had been a clear breakdown in mutual trust and confidence between the parties. As such, the Company would suffer an ongoing prejudice if the Applicant was to be reinstated or if the Company was restrained from appointing another CFO. To that end, the Court felt it would be inappropriate in such circumstances to permit the Applicant to return to his role.

Fennelly Order
As a result of the above, the court considered the possibility of a Fennelly Order, which in essence is an order directing an employer to pay an employee all salary and other benefits to which the employee is entitled under the relevant contract of employment, on the undertaking of the employee to carry out such duties under that contract as the employer may require.

The Court’s Decision
Court held that the Applicant had an implied right to fair procedures, which in turn required the Company to carry out an assessment of his performance during his probationary period. Keane J found that the least risk of injustice would be to apply a Fennelly order. As such the Company was ordered to pay the Applicant’s salary and benefits for the 6-month period post January 2020, pending the trial of action. Furthermore, if the Company wished to allocate duties to the Applicant during this period, they could do so. However, the Company may elect to replace the Applicant as CFO, provided he was still paid for the requisite period in a without prejudice basis, pending trial.

Conclusions
This decision serves as a reminder for employers when placing over reliance on probationary period terminations, particularly for more senior executive roles. Rather than affording the full extent of fair procedures and natural justice to employees when effecting probationary period dismissals, the case requires employers to strictly adhere to the terms of employment set down under employee’s contract. It is therefore encouraged that employees’ probationary clauses set out its own termination procedure and that same expressly excludes the rights governed under the disciplinary policy.
Equally, employers should consider the inclusion of a no- fault termination clause in an employee’s contract so that same can be applied during an employee’s probationary period, so that reasons for said dismissal do not need to be given. In the event that an employee is terminated due to substandard performance, employers should ensure that some form of engagement is made with the employee prior to termination, so that they are on notice of the performance concerns and afforded an opportunity to improve. However, employers should be slow to commence a performance improvement plan with the employee concerned due to the risk of delay associated with same.
In the absence of such engagement and the failure to provide the employee with an opportunity to improve said performance, the employer is at risk of being subject to an injunction application. Whilst the Courts appear to still be reluctant to reinstate employees where there has been a clear breakdown in mutual trust and confidence and may limit any financial relief to 6 months so as to avoid ongoing prejudice employers, this does not alleviate the financial risks associated with defending such injunction applications.

For further advices on the contracts of employment and/or advices on how to best approach the termination of employees with less than 12 months service, please do not hesitate to contact our employment team.

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