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Employees Sent to Prison – Dealing with Frustration of Contract

What happens if an employee is sent to prison when in employment? Do you keep their job open? Do you terminate their employment? It is not as clear cut as you may think and employer must be very careful when moving forward on something such as this.

Employees Sent to Prison

We will first look at a recent EAT case (UD396/2012) where an employee was sent to prison for 10 months and the company terminated his employment. The employee was released early and felt he had been unfairly dismissed. The Company held that they could not keep his job open and need to have someone in the role. The Tribunal agreed that it was not unfair as the company had no way of knowing when the employee would be let out and that his contract would not be frustrated. It should be noted in this case that the manner in which the employer went about the termination was less than ideal but as the employee was in prison they were somewhat restricted.

There is additional case law to back up the above mentioned employers claim, however as we mentioned an employer will need to thread lightly if they are looking to dismiss. Firstly it should be known that such as dismissal does not fall into the traditional grounds for dismissal as generally this would be unrelated to the employees work, so an employer would try to argue that the contract was “frustrated“, meaning it could not be carried out by the employee.

Gallagher -v- Eircom

In the case of Gallagher -v- Eircom (UD955/2004) the employee was given an 8 year prison sentence in 1998 and in 2004 the employer sought to terminate their employment seven days before their release. The employee argued that he would only be on unauthorised absence for seven more days and it was unreasonable. The employer argued however that the employee had not been dismissed but his contract frustrated and his contract was terminated on operation of law when he received the 8 year sentence. The Tribunal found in favour of the employer on the legal point that the employees contract terminated by operation of law when it was frustrated by a custodial prison sentence. The tribunal found that this doctrine of frustration operated independently of the parties.

There are some critical factors that must be observed when looking at this, which were set out in  Hare -v- Murphy Brothers [1974] 3 All ER 940, namely;

  • How long has the employee been employed?
  • What kind of position do they hold? is it one of trust?
  • How long is their prison sentence? if the sentence is short frustration will not apply
  • Can the company keep the role open or do they need to hire a replacement?

Employers must take account of these factors and as per Bailey -v- BP Oil, they must keep procedures in mind, although they may be unable to be performed with the employee in prison.

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