In Donal O’Donovan v Over-C Technology Limited and Over-C Limited, the chief financial officer of Cork-based a technology company, Over-C Technology Limited, had his contract of employment terminated during his probation period. After being told he was being dismissed, O’Donovan successfully applied for an injunction to restrain the company from effecting the termination.
The original High Court decision attracted considerable attention as it effectively undermined the ability of an employer to dismiss an employee during their probation period.
The Court of Appeal has now overruled that decision, restricting injunctions to cases where an employee is threatened with dismissal for misconduct. In her judgment, Ms Justice Costello said the trial judge had failed to give adequate weight to the “critical fact” that termination occurred during the probationary period.
“During a period of probation, both parties are – and must be – free to terminate the contract of employment for no reason, or simply because one party forms the view that the intended employment is, for whatever reason, not something with which they wish to continue,” she said. “Neither party can hold the other to the continuation of the employment against the wishes of the other.”
Acknowledging that the mutual trust and confidence between employer and employee had been lost, Ms Justice Costello continued: “In these circumstances, the courts do not normally grant permanent injunctions restraining the termination of the contract of employment as this would amount to a permanent mandatory injunction to continue a contract of employment in circumstances where such an order would be simply untenable.”
The case will give certainty to employers in the use of probation clauses in contracts
BDM Boylan Solicitors partner Pat Mullins, who represented Over-C in the appeal, told IEL: “The court has followed UK precedent, in stating that it is not a matter for the courts to expand upon the law relating to wrongful dismissal to fill any perceived gap as regards continuous service under unfair dismissal legislation. It is a matter for the Oireachtas [parliament] to legislate for any changes to the 12 months continuous service requirement under the Unfair Dismissals Acts.”
“This may be one of the most important employment law decisions in Ireland in years,” said Niall Pelly, a partner at GQ|Littler. “It will considerably rebalance the power dynamic between employees and employers during contentious dismissals.”
Businesses subject to an injunction must reinstate the employee until a full hearing, which can take up to 12 months to be heard. In the intervening period, the employer has to retain the employee on full pay or buy out their contract.
Subject to an injunction, employers are often unable to publicise the departure of an employee or appoint a successor, creating significant disruption if the employee concerned holds a senior position.
“This case is particularly important in making it clear that injunctions should be limited only to cases where an employee is being dismissed for misconduct, and especially so where an employee is still in their probation period,” said Pelly.
“Clearly, irrespective of the views of the employer as regards whether misconduct formed part of the reasons for dismissal, it is a matter for the courts to determine whether in fact misconduct was a factor in the rationale for dismissal,” said Mullins.
“The case will give certainty to employers in the use of probation clauses in contracts. In essence, these clauses should be kept simple and unequivocal. The High Court judgment was a departure from what employers believed to be the case, and the Court of Appeal judgment has confirmed that the departure was not warranted.”