Overview
- An employer has the right at common law to terminate an employee’s contract by giving proper notice (or a payment in lieu). Failure to give proper notice is a ‘wrongful dismissal’ for which an employee can sue for damages – fairness or otherwise is not an issue.
- Unfair dismissal is a creature of statute law. Unfair dismissal may occur, and commonly does, even where there is no breach of contract, i.e. the employer has given proper notice.
- To effect a fair dismissal, the reason for dismissal must come within one of the six potentially fair reasons for dismissal laid down by the Employment Rights Act 1996.
- The employer must then show that the decision to dismiss was itself reasonable and that the dismissal was carried out in a procedurally fair way. The provisions of the ACAS Code of Practice, expanded upon in the ACAS Guide, are essential reading because an unreasonable failure to comply with the Code (by either employer or employee) will mean that any tribunal award can be increased or reduced by up to 25%.
- Certain dismissals (e.g. for health and safety reasons) are deemed 'automatically unfair' and employees dismissed for such reasons do not need any qualifying period of service in order to bring a tribunal claim.
What is a dismissal?
- For unfair dismissal purposes the law (s. 95 of the Employment Rights Act 1996) defines dismissal as where:
- an employee’s contract is terminated with or without notice
- an employee terminates the contract, with or without notice, in circumstances such that he is entitled to terminate it without notice by reason of the employer’s conduct (constructive dismissal)
- a temporary (fixed-term) contract comes to an end without its renewal
- Dismissal by an employer is not effective until such time as it has been communicated to the employee, i.e. if a letter of dismissal is sent to an employee while he is away, the dismissal will not be effective until the employee has read the letter.
Other ways a contract may end
- Apart from dismissal, an employment contract may end in a number of other ways, including resignation, mutual agreement, and frustration:
Resignation
- Once an employee has resigned and an employer has accepted that resignation, the employee cannot unilaterally withdraw it.
- Resignations do not have to be in writing but its good practice to ask the employee to confirm a resignation in writing.
- Avoid taking words of resignation spoken in the heat of the moment at face value. Allow time for the employee to calm down.
- Do not pressure an employee into resigning as this may amount to an actual dismissal.
Mutual agreement
- The mutual consent of both parties can bring an employment contract to an end without there being a dismissal in law.
- Tribunals will expect to see clear evidence that the agreement, is in fact, mutual.
Frustration
- An employment contract may be frustrated where some event occurs which was not envisaged by the parties at the time the contract was entered into, and which makes the contract impossible to perform or radically different from that originally contemplated.
- Frustration automatically ends the contract – there’s no dismissal in law and so no need for notice to be given by either party.
- Tribunals are very reluctant to find that a contract has been frustrated. Two types of event can amount to frustration: a devastating illness or a prison sentence.
- Where prison is concerned, staff sentenced to relatively short terms may be able to argue that there is no frustration if the employment contract allows for other absences of a similar duration, e.g. for long-term sickness. Where an employee has been bailed, this will not necessarily amount to a frustrating event – it is the conviction that is important.
- Where illness is concerned, it must be a really serious condition (permanent incapacity) with no prospect of recovery.
Eligibility
- To bring an unfair dismissal claim, a person must:
- be an employee (as opposed to the wider definition of 'worker')
- have been dismissed
- have 1 year's continuous service if hired before 6 April 2012
- have 2 years' continuous service if hired on or after 6 April 2012
- not be an excluded employee, e.g. certain Crown employees
Potentially fair reasons for dismissal
- The following are potentially fair reasons for dismissing an employee: conduct, capability or qualifications, redundancy, breach of a statutory restriction, or some other substantial reason (SOSR).
- In addition to proving that a dismissal was for one (or more) of the potentially fair reasons, an employer must show that the decision to dismiss was reasonable and that the dismissal was procedurally fair.
Conduct
- A conduct dismissal is really one based on the employee's misconduct.
- The procedure an employer should follow will depend on whether the conduct in question is gross misconduct. If it is, an employer can normally dismiss for a first offence but must still follow a fair procedure.
- Defining gross misconduct is difficult – a good yardstick is whether the conduct fatally undermines the relationship of trust and confidence that exists between the employer and employee.
- Its impossible to list what amounts to gross misconduct in every case but an employer’s disciplinary procedure should include examples of the types of conduct that would normally warrant summary dismissal. Make it clear that any list is not exhaustive and illustrative only.
- For misconduct which is not gross misconduct a fair dismissal will normally involve a series of warnings.
- Misconduct outside work may be fair but only if it relates in some way to work – the mere fact that an employee has been charged with an offence will not usually justify dismissal without an investigation.
- Appropriate procedures will involve:
- conducting a full investigation into the alleged misconduct, ensuring that the people who carry out the investigation do not conduct the disciplinary hearing
- informing the employee of the nature of the complaint and providing him with details of the disciplinary hearing, including the fact that he has the right to be accompanied by another employee or trade union official
- imposing a sanction which fits the offence and is consistent with sanctions applied in previous similar cases
- informing the employee of his right of appeal
- See also Discipline and Dismissal Procedures and Checklist - Misconduct at work.
Capability or qualifications
- A ‘capability’ dismissal relates ‘skill, aptitude, health or any other physical or mental quality’.
- For qualifications, a fair dismissal can occur if it transpires (usually shortly after an employee has started work) that he or she does not have the necessary qualifications, or is employed on the understanding that he or she will obtain a certain qualification which they fail to do.
- The category of capability falls into two sections in practice: an employee’s poor performance, and an employee’s ill health, which may be either a long-term absence or intermittent short term-absences.
- If the issue is one of poor performance:
- make the employee aware of the complaint
- give him an opportunity to explain his performance
- inform him of the improvement required, the time-scale for improvement and the consequences of failure to improve
- consider further training or supervision and/or a warning
- offer and explain the right to appeal
- assess performance during the duration of the warning
- If the issue is one of short-term ill health:
- consult the employee about his absences
- consider warning the employee and follow disciplinary procedures before deciding to dismiss him
- consider obtaining a medical report in case the employee's absence is due to an underlying disability
- If the issue is one of prolonged ill health:
- obtain as much medical evidence as possible with the employee's consent (contracts and absence procedures should require employees to submit to medical examinations for these purposes)
- where an employee refuses to co-operate in providing medical evidence/undergoing an examination, inform him in writing that a decision will be taken on the basis of the information available - and that this could result in dismissal
- maintain regular contact with the employee during any absence and consult with them about their illness and any adjustments that could be made to help them return to work
- if the job can no longer be held open and no suitable alternative work is available, inform the employee of the likelihood of dismissal
- consider whether the provisions of the Disability Discrimination Act 1995 apply before taking any action
- before dismissing, consider whether any benefits under a long-term incapacity or ill-health retirement scheme are available
- See also:
Redundancy
- Dismissal by reason of redundancy is a potentially fair reason for dismissal.
- Redundancy occurs if a dismissal is 'wholly or mainly' attributable to the employer’s business closure, workplace closure or reduced requirement for employees.
- There must however be a genuine redundancy situation, the individual must have been fairly selected for redundancy and the redundancy must have been procedurally fair.
- See also Redundancy.
Breach of a statutory restriction
- If continued employment of the individual would breach a statutory duty or restriction, dismissing that employee is potentially fair.
- Examples include breach of the immigration rules; loss of driving licence where it is central to the employee’s job; failure to obtain certain qualifications; or where the employee has received a criminal record.
Some other substantial reason
- The SOSR category is a 'catch all' category (and one which is often overlooked) designed to cover dismissals which do not fall into any of the above categories but which are nevertheless potentially fair.
- Examples include:
- dismissing a temporary employee when the permanent employee returns from maternity leave (provided the temporary employee was informed in writing at the start of the job that their employment would terminate in this way)
- dismissal for refusing to accept changes to terms and conditions
- a breakdown in trust and confidence
- expiry of a temporary contract
- dismissal because of personality conflicts
- dismissal because of third-party pressure to dismiss
- business reorganisarion - where there is no actual 'redundancy' situation but an employer wants to introduce new terms and conditions for sound business reasons (see also Checklist - Changing Terms and Conditions of Employment)
Automatically unfair dismissals
- Dismissals for certain reasons are automatically unfair - and there is no need to consider whether the dismissal was reasonable or fair.
- As the scope of employment law continues to impose more restrictions on an employer’s right to dismiss, the list of these protected dismissals will continue to grow.
- The importance of this category of dismissals is that an employee does not need any minimum period of service to qualify for protection – he is protected from Day 1 of employment if a dismissal is made for one of the following reasons:
- a refusal to work on Sundays (in the retail sector)
- trade union activities
- rights under the Working Time Regulations
- health and safety activities
- taking leave for family reasons (e.g. pregnancy, maternity leave, parental leave, paternity leave, time off for emergencies) or requesting flexible working
- performing functions as a trustee of an occupational pension scheme
- performing functions as an employee representative under TUPE or collective redundancy provisions
- asserting rights under the National Minimum Wage regulations
- asserting rights under the Part-time Workers Regulations
- participating in 'protected' industrial action
- asserting a statutory right including rights under the Employment Rights Act 1996 and the right to be accompanied in disciplinary or grievance hearings
- where the employee has made a protected disclosure
Reasonableness and fairness
- Once the employer has established a potentially fair reason, he must also show that he has been reasonable in dismissing the employee for that reason.
- The normal test is whether the dismissal fell within the range of reasonable responses open to an employer, i.e. was it reasonable to dismiss the employee rather than to give him another sanction, such as a written warning?
- This includes consideration of whether the procedure followed by the employer was fair in all the circumstances.
- Employers must have regard to the ACAS Code of Practice on Disciplinary and Grievance Procedures when dealing with disciplinary situations such as misconduct and poor performance.
- Conduct: to establish reasonableness for conduct dismissals the employer must be able to show that he believed the employee to be guilty of the misconduct at the time of the dismissal, he had reasonable grounds for believing the employee to be guilty, and he had carried out a reasonable investigation (what are usually called the British Home Stores v Burchell guidelines after the 1980 case of that name).
- Capability: the tribunal will look at such things as: Did the employee know what was expected of him or her? Were they given time to improve their performance? Was the employee warned of the consequences of a failure to improve? Was there a proper appraisal of the employee?
Did the employer provide training and/or supervision? Did the employer consider alternative employment? - Redundancy: an employer will normally only have acted reasonably if he warns and consults the employee, has a fair redundancy selection procedure, and looks for alternative employment within the organisation.
- Breach of statutory restriction: an employer must have considered the extent of the statutory restriction and how much at affects the employee’s ability to do his or her job the duration of the restriction, and any alternatives to dismissal.
- SOSR: reasonableness will depend on the circumstances of each case but a tribunal will look at whether the employer has investigated the situation, consulted with the employee, warned the employee of the risk of dismissal, given the employee a chance to state their case, and looked for alternatives to dismissal.
Remedies
- A dismissed employee can ask for re-instatement (return to previous role on same terms and conditions), re-engagement (employer must provide employee with a comparable/suitable role to the job from which he was dismissed but not necessarily on the same terms) or compensation.
- Compensation is the most usual remedy which consists of a basic award and a compensatory award.
- The dismissed employee must apply to an employment tribunal within 3 months of the effective date of termination.
- Out-of-time claims may be heard if the employee shows that it was not reasonably practicable to present the claim on time and the claim is submitted within a reasonable time of it becoming practicable to do so.
- Tribunals have a duty to consider reinstatement or re-engagement but will not force an employer to take the employee back. The tribunal will only make such an order if it considers it would be practicable for the employer to comply with it.
- If a reinstatement/re-engagement order is not complied with the tribunal may make an additional award (of between 26 and 52 weeks' pay) on top of the basic and compensatory awards.
Basic award
- This is calculated in the same way as a statutory redundancy payment:
- 1 ½ week’s pay for each year of employment during which the employee was 42 or over
- 1 week’s pay for each year of employment in which the employee was age 22-41
- ½ a week’s pay for each year of employment in which the employee was 21 or less
- Only a total of 20 years’ service can be taken into account and a week’s pay is capped at an amount which increases each year (currently £400; increases to £430 from 1 February 2012).
- The basic award can be reduced in certain circumstances, i.e. where the employee has unreasonably refused an offer of reinstatement or re-engagement or where the employee's conduct contributed to his dismissal.
Compensatory award
- The tribunal will also make a compensatory award for a 'just and equitable' amount.
- The award may include actual loss, future loss, possibly stigma damages, loss of statutory rights, expenses reasonably incurred in looking for a job, and pension losses.
- Employees are under a duty to mitigate their loss by attempting to find alternative employment and any failure to do this may result in a reduction of the compensatory award.
- A compensatory award is subject to a statutory maximum increased each year. The current maximum is £68,400 (increases to £72,300 from 1 February 2012).
- If an employee is dismissed for a discriminatory reason the tribunal can make an unlimited compensatory award. In addition, awards of interest and injury to feelings can be made.
- Tribunals have the discretion to increase or reduce awards by up to 25% if the employer or the employee unreasonably fails to comply with the ACAS Code of Practice.
Resources
The Policies and Documents section contains many specimen letters dealing with disciplinary issues, model policies and procedures and line manager guides on investigating misconduct and related issues (subscribers only).
Checklists
- Intermittent short-term absences
- Long-term ill health
- Misconduct at work
- Performance issues
- Handling Employment Tribunal Claims
ACAS
- ACAS Code of Practice: Disciplinary and Grievance Procedures
- Discipline and Grievances at Work: the ACAS Guide
- How to Manage Performance
- Managing Attendance and Employee Turnover
Business Link
CIPD
Worksmart (TUC)
Subscribers only - 
