Smith v Trafford Housing Trust

Factual and Procedural Background

On Sunday 13 February 2011, the Plaintiff, a practising Christian and manager employed by the Defendant, a private housing trust ("the Trust"), posted two comments on his Facebook wall in response to a BBC news article concerning the potential approval of same-sex marriages in church. The Plaintiff's Facebook profile identified him as a manager at the Trust, and approximately 45 of his Facebook friends were fellow employees of the Trust.

Following these postings, the Plaintiff was suspended on full pay and subjected to a disciplinary investigation and hearing. The disciplinary panel found the Plaintiff guilty of gross misconduct and demoted him to a non-managerial position with a 40% reduction in pay, phased over two years after an appeal. The Plaintiff did not pursue unfair dismissal claims but initiated proceedings for breach of contract in the Manchester County Court, seeking damages for the demotion and pay reduction, asserting he was not guilty of misconduct.

The Trust contended that the Plaintiff's Facebook postings breached its Code of Conduct and Equal Opportunities Policy, justifying disciplinary sanction, and alternatively argued that any breach was waived by the Plaintiff's acceptance of the demoted role, or that damages should be limited to the notice period pay difference.

Legal Issues Presented

1. Whether the Plaintiff's Facebook postings constituted misconduct under the Trust's Code of Conduct and Equal Opportunities Policy, justifying his demotion.
2. If the postings did constitute misconduct, whether the Trust was entitled to demote the Plaintiff as a disciplinary sanction under the employment contract.
3. Whether the demotion amounted to a dismissal (actual or constructive) and the legal consequences thereof.
4. The appropriate measure of damages for any breach of contract by the Trust arising from the demotion.

Arguments of the Parties

Plaintiff's Arguments

• The Plaintiff denied any misconduct, asserting his Facebook postings were lawful expressions of his religious and political beliefs made in a personal and social context.
• He argued that the Trust's Code and Policies did not objectively apply to his conduct on Facebook, given the social and non-work-related nature of the medium and the voluntary nature of his Facebook friendships with colleagues.
• The Plaintiff contended that the Trust had no contractual right to demote him absent misconduct, and since no misconduct occurred, the demotion was a breach of contract.
• He maintained that continuing to work in the demoted role was an affirmation of the contract without waiver of damages, entitling him to damages for the ongoing pay disparity.
• The Plaintiff submitted that damages for wrongful dismissal should not be limited to the contractual notice period, relying on recent case law permitting counter-factual analyses of damages beyond the traditional approach.

Defendant's Arguments

• The Trust submitted that the Plaintiff's Facebook postings breached the Code of Conduct and Equal Opportunities Policy by potentially bringing the Trust into disrepute, promoting religious views contrary to policy, and failing to treat colleagues with dignity and respect.
• It argued that the Plaintiff's identification as a Trust manager on Facebook and the presence of many colleagues among his Facebook friends created a sufficient work-related context to apply the Code and Policies to his postings.
• The Trust contended that the demotion was a lawful disciplinary sanction for misconduct under the contract and that the Plaintiff was dismissed (actually) by the demotion and pay reduction.
• It further argued that damages for wrongful dismissal were limited to the contractual notice period and that the Plaintiff had waived any breach by continuing to work in the demoted role.
• The Trust relied on established authority, including the House of Lords decision in Johnson v Unisys, to assert that contractual damages cannot extend beyond statutory remedies for unfair dismissal.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
X v Y [2004] ICR 1634	Distinction between disciplinary fairness and contractual claims; Convention rights not directly enforceable against private employers.	Referenced to clarify that the case did not involve enforcement of convention rights or statutory unfair dismissal claims.
Johnson v Unisys [2003] 1 AC 518	Limits on contractual damages for dismissal claims; exclusion of damages recoverable via statutory unfair dismissal claims.	Applied to limit the Plaintiff's claim for damages to contractual notice period pay difference and exclude compensation for unfair dismissal.
Hogg v Dover College [1990] ICR 39	Demotion with pay reduction can amount to actual dismissal; continuing work in demoted role does not amount to affirmation of original contract.	Followed to determine that Plaintiff's demotion constituted wrongful dismissal despite continuing to work in the new role.
Marriott v Oxford and District Co-operative Society Ltd (No 2) [1970] 1 QB 186	Principles on dismissal by breach and acceptance of repudiation by conduct.	Supported the conclusion that continuing to work in a demoted role did not affirm the original contract.
Durham Tees Valley Airport Ltd v BMI Baby Ltd [2010] EWCA Civ 485	Counter-factual approach to damages for repudiatory breach; assessing how contract would have been performed absent breach.	Considered but distinguished on grounds that employment contracts differ from fixed-term contracts with discretion in performance.
Livingstone v Rayward's Coal Company (1880) 5 App. Cas. 25	Foundational principles on damages for breach of contract.	Reviewed as part of the analysis on damages for repudiatory breach.
Abrahams v Herbert Reich [1922] 1 KB 477	Damages for breach of contract principles.	Reviewed in the context of damages analysis.
Lavarack v Woods of Colchester Ltd [1967] 1 QB 278	Damages for breach of contract; assessment of loss.	Reviewed in the damages discussion.
Cantor Fitzgerald International v Horkulak [2004] EWCA Civ 1287	Damages for wrongful dismissal; loss of bonus and other benefits.	Reviewed in the context of damages principles.
Edwards v Chesterfield Royal Hospital NHS Foundation Trust [2012] 2 AC 22	Reinforcement of Johnson exclusion; limits on contractual damages for breaches overlapping statutory rights.	Applied to reinforce the exclusion of damages beyond notice period for employment contract breaches.

Court's Reasoning and Analysis

The court undertook a detailed examination of the Trust's Code of Conduct and Equal Opportunities Policy, interpreting them objectively as part of the employment contract. It emphasised that any breach constituting misconduct must be assessed by what a reasonable employee would understand the codes to require, particularly regarding conduct outside working hours and in personal social media use.

The court found that the Plaintiff's Facebook wall was primarily a personal and social medium, not a work-related communication platform. Although the Plaintiff identified himself as a Trust manager and had colleagues among his Facebook friends, the overall context of his postings, mixed with unrelated personal content, did not reasonably suggest that he was speaking on behalf of the Trust.

The court rejected the Trust's argument that the Plaintiff's postings brought the Trust into disrepute, holding that reasonable readers would not associate the Plaintiff's personal views with the Trust's official position. It also found that the postings did not amount to prohibited promotion of religious or political views under the Code, as the Plaintiff's comments were part of a social media conversation and not proselytising or canvassing.

Regarding the claim that the postings mistreated colleagues, the court acknowledged that one colleague was upset by a misinterpretation of the Plaintiff's comments. However, the court concluded that the postings were not objectively disrespectful or likely to cause unjustified upset, and that the relevant Code provisions were not intended to apply to such personal expressions outside the workplace.

Consequently, the court held that the Trust had no contractual right to demote the Plaintiff based on the alleged misconduct, and the demotion amounted to a breach of contract.

On the issue of dismissal, the court relied on binding authority establishing that a demotion with pay reduction can constitute an actual dismissal, and that continuing to work in the demoted role does not amount to affirmation of the original contract. The Plaintiff was therefore wrongfully dismissed.

In assessing damages, the court considered recent case law on repudiatory breaches and counter-factual scenarios but distinguished the present employment contract from contracts involving discretionary performance. The court reaffirmed the established principle that damages for wrongful dismissal are limited to loss during the contractual notice period, excluding compensation for unfair dismissal claims due to statutory exclusivity rules.

The court expressed concern about the harsh financial consequences for the Plaintiff but noted that the statutory employment tribunal system would be the appropriate forum for broader remedies, which the Plaintiff did not pursue in time.

Holding and Implications

The court held that the Defendant breached the Plaintiff's employment contract by demoting him without lawful cause, as the Plaintiff's Facebook postings did not constitute misconduct under the Trust's Code of Conduct or Equal Opportunities Policy.

The demotion amounted to a wrongful dismissal. However, damages are limited to the difference in pay during the Plaintiff's twelve-week contractual notice period following the breach.

The court declined to extend damages beyond this period, adhering to the principle that statutory remedies for unfair dismissal prevent recovery of broader damages in contract. The Plaintiff's continued employment in the demoted role did not waive his right to damages.

No new precedent was established; the decision confirms the application of established principles concerning the interpretation of workplace codes in relation to social media conduct, the contractual limits on employer disciplinary powers, and the measure of damages for wrongful dismissal.