Managing a potential dismissal in the workplace is a delicate and complex process that requires a detailed understanding of UK employment law. Dismissals can have significant legal and financial implications for employers if they are not handled correctly. This guidance explores the different types of dismissal (fair, unfair, wrongful, constructive and redundancy) and provides practical advice on how employers can navigate these processes while remaining compliant with current UK legislation.
Fair dismissal
A fair dismissal occurs when an employer has a valid reason for dismissing an employee and follows a fair procedure in doing so. The Employment Rights Act 1996 idenitifies five potentially fair reasons for dismissal:
Conduct: If an employee’s behaviour is unacceptable or breaches company policy, dismissal may be justified on this ground. Some examples include theft, gross misconduct or habitual lateness.
Capability or Performance: Dismissal may be warranted if an employee is failing to perform their work duties due to a lack of skills, qualifications, or health issues.
Redundancy: If the employer needs to reduce staff or the employee’s role is no longer required this is known as redundancy and under these circumstances redundancy can be a fair reason for dismissal.
Statutory Illegality: an employee can be fairly dismissed if continuing to employ them would be acting against the law. For instance, if a truck driver loses their driving licence, it would be illegal to continue to allow them to work and therefore dismissal may be necessary.
Some Other Substantial Reason: This is a broad category that can include various circumstances not covered by the other reasons such as a breakdown of trust (mutual or otherwise) between employer and employee.
Tips for conducting a procedure that is fair when considering a dismissal are as follows:
- Investigation – conduct a thorough investigation into the reasons for a dismissal.
- Warnings – where appropriate issue warnings before considering dismissal (particularly for conduct and performance issues). A common approach is the “three strikes and you are out” rule, where issuing three warnings before dismissal is generally viewed as a reasonable and fair process.
- Hearing – allow the employee to present their case in a formal meeting.
- Appeal – offer the employee the right to appeal the decision.
Failure to follow these steps can result in a dismissal being deemed unfair, even if the reason itself was valid.
Unfair Dismissal
Unfair dismissal occurs when an employee is dismissed without a fair reason, without following the correct procedure, or if in the circumstances the decision to dismiss was unreasonable.
Employees with at least two years of continuous service have the right to claim unfair dismissal. However, there are exceptions where the two-year rule does not apply, such as in cases of discrimination or whistleblowing.
Examples of Unfair Dismissal:
- Automatically Unfair Reasons: Dismissing an employee for prohibited reasons such as pregnancy, taking maternity leave, whistle-blowing or for being a trade union member is automatically unfair.
- Lack of Procedure: Even if the dismissal reason is potentially fair, not following the correct disciplinary or redundancy procedure can render the dismissal unfair.
- Unreasonable Decision: The test applied here is whether the decision to dismiss fell outside the range of reasonable responses open to a reasonable employer.
Understanding the impact of Labour’s proposal to remove the two year qualifying period for unfair dismissal
The Labour Party pledged to scrap the two-year qualifying period for unfair dismissal claims if elected, a move that would significantly alter the current landscape of employment rights in the UK. This proposal is likely to be included in the Employment Rights Bill which was announced in the King’s Speech on 17 July 2024 and is due to be introduced to Parliament in autumn 2024.
The aim of the proposal is to offer immediate protection to all employees, allowing them to bring unfair dismissal claims from day one of their employment. Labour’s plans reflect a broader commitment to strengthening workers’ rights and addressing the imbalances in the employer-employee relationship.
So, what does this mean for employers? If implemented, this change would compel employers to exercise greater caution and ensure fairness in dismissal decisions from the outset, as any employee could potentially bring a claim for unfair dismissal regardless of their length of service.
It is likely that the operation of probationary periods will be added to the range of potentially fair reasons for dismissal, so that if an employer follows a fair and transparent probation process in ending an employee’s employment during probation this would be a fair dismissal.
To prepare for the potential removal of the two-year period for unfair dismissal claims, employers should review and strengthen their policies and procedures (including probation procedures), ensure managers and HR staff are well trained in fair dismissal practices and maintain thorough documentation of all employment actions. Early intervention in employee issues and seeking legal advice when necessary will also be crucial in minimising risks under the new rules should they be implemented. By adopting these strategies employers can better prepare for the potential upcoming changes in the law and reduce the risk of legal challenges associated with unfair dismissal claims.
Consequences for Employers
If an employment tribunal finds the dismissal to be unfair, the employer may be ordered to reinstate the employee or pay compensation, which can be substantial. Compensation consists of a basic award (calculated in the same way as statutory redundancy pay) and a compensatory award which reflects the losses suffered by the employee as the result of their dismissal. Currently the maximum compensatory award for unfair dismissal is the lower of 12 months’ salary or £115,115.
Wrongful Dismissal
Wrongful dismissal refers to a breach of contract by the employer, usually related to not giving proper notice. Unlike unfair dismissal, wrongful dismissal does not depend on the fairness of the reason for dismissal but on whether the employer adhered to the terms of the employment contract.
Key Points:
- Notice Period: Employers must provide the notice period outlined in the employee’s contract or statutory minimum notice if no contract exists (one week’s notice for each year of service, up to a maximum of 12 weeks).
- Gross Misconduct: In cases of gross misconduct, employers may dismiss without notice, but the misconduct must be proven and so serious as to amount to a fundamental breach of the employment contract by the employee.
- Qualifying Period: there is no qualifying period of employment for a wrongful dismissal claim.
Potential Claims
Employees can claim wrongful dismissal in a civil court or an employment tribunal, where they may be awarded damages equivalent to what they would have earned during the notice period.
Constructive Dismissal
Constructive dismissal occurs when an employee resigns due to the employer’s conduct, which has made their position untenable. The legal test is whether the employer’s conduct amounts to a fundamental breach of the employment contract which, under contract law principles, entitles the employee to terminate the contract without notice.
The employer’s actions must constitute a serious breach of contract, such as
- Unilateral changes to employment terms: Significant changes to job duties, location, or pay without the employee’s consent.
- Bullying or harassment: Allowing a toxic work environment to persist.
- Failure to support: Not addressing serious grievances raised by the employee.
Legal Considerations
Constructive dismissal claims are challenging to prove, as the burden of proof lies with the employee. However, employers should be aware that a pattern of unfair treatment can lead to such claims. Claims can be founded on a series of acts which cumulatively add up to a fundamental breach of the contract, and where the employee relies on the last of these acts as the “final straw” which triggers their resignation.
Employer’s Defence
Employers may be able to defend constructive dismissal claims by showing that the employee did not raise concerns or that the issue was resolved promptly and adequately when it was raised. Alternatively they may contend that the alleged breach was not the reason for the employee’s resignation, or that they delayed too long before resigning and so could be considered to have accepted the breach.
Redundancy
Redundancy occurs when an employer needs to reduce its workforce due to business closure, relocation, or a diminished need for certain roles. Redundancy is a potentially fair reason for dismissal, but it must be handled carefully to avoid claims of unfair dismissal. An employee who is dismissed for redundancy reasons is also entitled to statutory redundancy pay if they have at least two years’ service.
Key steps in redundancy
- Consultation: Employers must consult with employees or their representatives, particularly in cases of collective redundancy (proposed dismissal of 20 or more employees).
- Selection Criteria: Employers must use fair and objective criteria when selecting employees for redundancy, such as skills, experience, and performance.
- Alternative Employment: Employers should consider offering alternative roles within the company, or other group companies, if available.
- Redundancy Pay: Employees with two or more years of service are entitled to statutory redundancy pay, which increases with length of service and age.
- Common Pitfalls – failing to consult properly or using a discriminatory selection criterion can lead to claims of unfair dismissal.
Practical Guidance for Employers
Documentation and Record Keeping
Maintaining thorough records is crucial for defending against any claims of unfair or wrongful dismissal. This includes contracts of employment to ensure all employees have a clear, written contract that outlines notice periods and grounds for dismissal. Additionally, employers should keep detailed records of any disciplinary actions, warnings, and meetings; and finally, with regards to grievances: document all employee grievances and the steps taken to address them.
Employee Communication
Clear communication can prevent many dismissal-related issues. Employers should have:
- Regular Feedback: Provide regular feedback on performance and conduct to prevent issues from escalating.
- Consultation: Engage in genuine consultation with employees, particularly during redundancies or significant changes to their role.
- Right to Appeal: Always inform employees of their right to appeal a dismissal decision.
Legal Advice
Given the complexity of employment law, seeking legal advice is advisable when considering dismissal. This is especially important in situations involving:
- Gross Misconduct: Where immediate dismissal is being considered without notice.
- Redundancy: Particularly in cases of collective redundancy.
- Constructive Dismissal: If there is a potential claim due to unresolved employee grievances.
Training for Managers
Managers should be trained in the proper procedures for handling dismissals to ensure they comply with legal requirements and company policies. Training should cover:
- Disciplinary and Grievance Procedures: Understanding the legal framework and company policies.
- Performance Management: Techniques for managing underperformance before considering dismissal.
- Conflict Resolution: Strategies to address workplace conflicts that could lead to constructive dismissal claims.
Navigating the different types of dismissal under UK law requires a thorough understanding of legal obligations and best practices. Employers must ensure that dismissals are fair, justified, and procedurally correct to avoid costly legal challenges. By following the guidance outlined in this article—focusing on documentation, communication, legal advice, and training—employers can maintain best practice in managing their workforce and mitigate legal risks relating to dismissals.
For further information contact Mary Anane or any member of Furley Page employment team on 01227 763939.
