The Irish courts have shown themselves willing to intervene in certain cases of executive dismissal, writes Terence McCrann

NON-IRISH businesses tend to assume that there is no scope for senior executives with substantial remuneration packages and generous termination provisions to "renegotiate" terms when the relationship breaks down.

However, in a series of cases, the High Court has granted injunctions to restrain a purported dismissal. In some instances, this has led to an effective renegotiation of the agreed terms of employment.

The Irish courts have not adopted the approach taken in England, that specialist industrial tribunals are the appropriate fora for disputes concerning such dismissals. Whilst the Irish Employment Appeals Tribunal deals with unfair dismissals, this has not prevented employees from seeking and being granted injunctive relief by the courts.

While the parameters for the granting of these injunctions have broadened, each case turns on its unique facts. The relief should still be regarded as an exception to the general rule that the remedy for a wrongful dismissal is a claim for breach of contract, since equitable remedies are generally not available because of the courts' reluctance to order performance of contracts of a personal nature.

Frequently an employee anticipating an imminent dismissal will, without any notice to his employer, apply to court for a temporary order restraining the dismissal and directing that he remain on the payroll pending the interlocutory hearing.

Such an order leaves the employer on the back foot and in reactive mode. Many executive employees elect to give notice to their employer of the proposed application for an order restraining further steps to implement a dismissal and directing that usual remuneration continue until the trial.

When asked to grant an injunction, the Irish courts apply the usual criteria (from Campus Oil v Minister for Industry and Energy (No 2) 1983) of (1) whether there is "a fair issue" to be tried; (2) whether damages would be an adequate remedy, if the party seeking the injunction were to be successful at the trial of the action; and (3) whether the "balance of convenience" favours the granting or refusal of an injunction.

In addition the Supreme Court has held that an applicant must demonstrate a strong case that he is likely to succeed at the hearing of the action (Lingam v HSE 2005).

While applying these apparently demanding criteria, the courts have nonetheless granted injunctions to executive employees in several cases. The earlier cases focused on the unfairness that would result from an executive employee being left without pay pending the full hearing on whether the termination was lawful.

Where there is an allegation of misconduct, the courts consider that principles of natural justice and constitutional fairness of procedures must also be assessed in deciding whether or not an injunction ought to be granted.

Not surprisingly, the possibility of an injunction causes great uncertainty and rings alarm bells for employers and their lawyers. A decision to terminate the services of an executive employee is not taken lightly and inevitably follows an assessment that to do so is, for whatever reason, in the employer's best interests. In a recent case, (Williamson v Payzone plc 2008: Nagle v Payzone plc 2008), Payzone found itself on the receiving end of an injunction. Apart from being restrained from terminating the employment of its chief executive and chief financial officer, the court's order prevented it interfering with them carrying out their normal duties pending the interlocutory hearing.

In other words, it found itself in the frustrating position that, having lost confidence in the holders of two crucial management posts and having taken a decision to terminate their employment, it could not only not implement that decision but was forced to permit the executives to continue in their roles and pay them until the matter could be heard. Also their purported removal as directors was subject to injunction.

The reality is that few of these cases ever go to full trial, largely because of the very significant legal costs and organisational disruption involved. Moreover, the prospect of the status quo being compulsorily maintained, with executives carrying on in their roles despite owner's or management's wish to see them gone, is often unacceptable for all concerned. As a result, these cases are usually settled prior to or during the interlocutory hearing. The tendency to seek to resolve is often also motivated by a wish to contain the collateral damage that can result. For example, in the Payzone case, there was significant media interest around each court appearance and, perhaps more importantly, the granting of the injunction caused the unwelcome suspension of trading in its shares.

The possibility or threat of an injunction is a crucial consideration in advising employers considering the dismissal of executive employees. It is the "nuclear option" and while the requirement that the executive establish a strong and clear case that he is likely to succeed at the hearing may indicate the court's willingness to control the expansion of this jurisdiction, the remedy of an interlocutory injunction to restrain dismissal nonetheless continues to be available. Accordingly, termination of executive employees in Ireland continues to carry a heavy legal risk and often a costly health warning.

Terence McCrann is head of the employment group at corporate law firm McCann FitzGerald