At a Glance

 

An employee has the right not to be unfairly dismissed, unless as an employee shareholder the employee has opted out of unfair dismissal. The employer must act reasonably in all the circumstances.

A dismissal occurs when:

  • an employer terminates an employee's employment with or without notice, or
  • when an employee is employed under a limited term contract and the contract is terminated by virtue of the limiting event without being reviewed under the same contract, or
  • the employee terminates the contract, with or without notice, in circumstances in which he is entitled to terminate it without notice by virtue of the employer's conduct.

A dismissal is justified, that is "fair" if the dismissal:

  • relates to the employee’s conduct.
  • relates to the employee’s capability or qualifications.
  • is due to a redundancy.
  • is due to retirement.
  • is because continuing employment would be illegal.

There may be other justifiable reasons for dismissal.

A dismissal is deemed unfair when the employer acts unreasonably. Dismissal is treated as automatically unfair in certain situations (see Overview).

  • Any dismissal could result in a claim for unfair dismissal, and possibly also wrongful dismissal.
  • In all cases a dismissal process should be followed before the dismissal.
  • A failure to follow proper procedures could leave the employer open to a claim by the employee. The process does not need to take long in the most straightforward of cases.

Many employees cannot make a claim for unfair dismissal without two year’s service, but they still have alternative options and often there can be a claim made even without the employment service requirement.

The Statutory Dispute Resolution Procedures were repealed in April 2009, replaced with an ACAS Code of Practice.

Overview

 ACAS Code of Practice (CoP)
The previous (very unpopular) Statutory Dispute Resolution procedures were repealed in April 2009; employers are free to determine and follow their own disciplinary procedures. As an ACAS CoP is in place it is normally advisable to ensure that the employer's procedure complies with the CoP.

Unlike the Statutory Dismissal & Disciplinary Procedures, a failure to follow the ACAS CoP will not make any dismissal automatically unfair. A tribunal will consider the facts of the case, and determine whether a dismissal was fair & proportionate (whether the action was what a reasonable employer would take) in the circumstances, and only where this is not found to be the case, will adherence to the ACAS CoP come into account – without reasonable grounds not to follow the CoP, a tribunal may increase an award against an employer by up-to 25%.

Two year’s service – the Qualifying Period

For employments commencing on or after April 2012 an employee must have worked for the employer for at least 2 years before they can bring a claim for unfair dismissal. Before this the period was one year.

Automatically unfair dismissal

The qualifying period does not exist for claims where the dismissal is alleged to be unfair and includes a dismissal due to reasons including:

  • Jury service
  • Family reasons: pregnancy, childbirth, maternity or paternity leave, adoption leave, parental leave, or time off to look after dependants.
  • Health and safety
  • Sunday working
  • Working time
  • National Minumum Wage
  • Requests for flexible working
  • A business being sold or transferred (TUPE)
  • Trade union membership or taking part in trade union activities
  • The employee seeking to exercise their legal rights
  • The employee carrying out their function as a trade union or workplace representative, or a pension scheme trustee
  • The employee making a “protected disclosure” – whistleblowing
  • Sex, marital status, gender reassignment, race, colour, nationality, ethnic origins, sexual orientation, or religion
  • The employee being selected for redundancy for any of the above reasons

The above list is not exhaustive: employees have numerous grounds for which an unfair dismissal claim can be made.

Note of caution:
do not assume that an employee with less than two years' service can be dismissed freely. While they may not have so many rights are longer-established employees, if an employee can get a claim accepted by an employment tribunal on the basis of an automatically unfair dismissal, it won’t matter much if this claim has no validity or is not the real reason for dismissal: the case will still have to be defended at potentially significant cost to the employer. 

A wrongful dismissal (for which no qualifying period is necessary) occurs when the employer does not follow the company’s disciplinary procedures. The awards for wrongful dismissal are normally a lot less than for an unfair dismissal, but employers should still be cautious to avoid these claims, as there will be costs to defend any action.

Practical steps to reduce risk

  • Address any issues with employees as soon as they emerge.
  • Try to resolve problems by an informal meeting with the employee, but make it clear that a formal process could be used if the issue is not resolved.
  • Involve HR (or an employment law/HR consultancy service) at an early stage, as disciplinary procedures can be complicated. Ask someone from HR to attend any potentially difficult meetings.
  • Think carefully about any e-mails (or other written correspondence) sent to employees. For example, never send any aggressive e-mails.
  • Keep records of any e-mails, letters, conversations or meetings (formal or informal) with employees relating to their performance.
  • Conduct regular appraisals with employees to give an honest assessment of their performance and allow them to raise any concerns. Do not give flattering performance reviews if they are undeserved, as it could make proving a fair dismissal in the future more difficult.
  • Use probationary periods effectively. If there are legitimate concerns about a new employee, it may be possible to extend the period or dismiss them at the end of it (providing at least one week's notice is given).
  • Do not sideline, bully or shun an employee to get them to leave. If the employee can demonstrate that they resigned for such a reason, they could have a claim for constructive dismissal
  • If stress could be a reason for an employee's poor performance (for example, they are struggling with an increased workload) involve HR immediately as extra care needs to be taken.
  • Fully investigate any claims made by or against an employee before making any decision.
  • If the decision results in dismissal, ensure the employee is given notice (or a PILON) in accordance with their contract .
  • Do not claim that a dismissal is for a reason other than the real one. For example, avoid using redundancy as the reason for dismissing an employee for poor performance. This is likely to be exposed in any subsequent tribunal hearing and will not reflect well on the employer.
  • Do not assume that someone can be dismissed simply because their fixed-term contract has come to an end. This could lead to a claim for unfair dismissal.
  • If an employee has raised a grievance or claim in the past, ensure that any further allegations are dealt with fairly to avoid the risk of him bringing a victimisation claim.
  • Sometimes, from both a practical and commercial point of view, it is simplest to try to reach a financial agreement with an employee to leave. Always involve HR before entering into any negotiations. If agreement can be reached, the employer should usually ask the employee to sign a compromise agreement (in order to protect it against future claims) but must ensure that the employee has had independent legal advice on the agreement.
  • A manager or employee who is asked to give a reference (oral or written) for an employee should discuss it with HR. Always ensure that any such references are accurate.

Limit on claims

Claims for unfair dismissal are capped at £78,962 from 6 April 2016. From 29 July 2013 a new rule applies in calculating claims which may reduce claims significantly.

An award is in two parts, the first part is calculated like statutory redundancy pay and so depends on age, pay and years of service, and the second part is compensatory, this part is limited to the lower of 12 months pay and £78,962. There is no allowance for loss of pension rights.