Unfair Dismissal

An employer that dismisses an employee could face a claim for unfair dismissal in the employment tribunal unless It can show a potentially fair reason for the dismissal. There are six potentially fair reasons which this article explains

If there is fair reason the tribunal will determine whether or not the employer acted reasonably in treating that reason as sufficient to justify dismissal. Since April 2009 a new regime under a revised Acas Code of Practice on Disciplinary and Grievance Procedures (Acas Code) will apply. If An Employment tribunal finds that the dismissal is unfair, it can order the employer to re-engage or reinstate the employee or (as is more likely in practice) pay the employee compensation. These provisions are contained in the Employment Rights Act 1996 (ERA 1996).

What is a dismissal?

In order to bring a claim for unfair dismissal, an employee must have been dismissed. There will be a dismissal if:

  • The employer terminates the employment, either summarily (that is, with immediate effect) or on notice.
  • The employee resigns (with or without notice) and can establish that they were constructively dismissed.
  • The employer does not renew a fixed-term contract on the expiry of the fixed term.
  • By agreement of the parties. This is unlikely to include voluntary redundancies provided there is a true redundancy situation
  • Retirement.
  • By operation of law, for example:
    Because the contract has been frustrated by an unforeseeable event that makes performance impossible or unlawful or radically changes the contract.
  • Because of a supervening event. This could include the death of the employee or an individual employer, the dissolution or major reconstruction of the employing partnership and certain insolvency situations.

What is a fair dismissal?

For a dismissal to be fair:

  • The employer must have a potentially fair reason for the dismissal; and the employer must have acted reasonably in treating that reason as sufficient to justify dismissing the employee. There are six potentially fair reasons for dismissal:
    • Conduct
    • Capability
    • Redundancy
    • Breach of a statutory restriction
    • Retirement
    • SOSR ("some other substantial reason")

The reason for a dismissal may fall into more than one of the six potentially fair categories, as there is a certain degree of overlap between them. It is therefore important to refer to every potentially fair reason for the dismissal when defending an unfair dismissal claim. Where there is more than one reason for the dismissal, the relevant reason for the purposes of deciding if the dismissal was fair will be the "principal reason" for the dismissal.

Employees have the right to be provided with a written statement setting out the reasons for their dismissal under the ERA 1996, and this document may be used in evidence in any subsequent tribunal proceedings.

Conduct - It is potentially fair to dismiss an employee for misconduct, which may be either a single act of serious misconduct or a series of acts that are less serious.

Capability - For the purposes of an unfair dismissal, "capability" should be assessed by reference to an employee's "skill, aptitude, health or any other physical or mental quality". Capability dismissals fall into two main groups:

  • Dismissal because of an employee's poor performance or attitude.
  • Dismissal because of an employee's ill health.

Redundancy - A dismissal on the grounds of redundancy is a potentially fair dismissal where the dismissal is "wholly or mainly attributable to" the employer either:

  • Ceasing or intending to cease to carry on the business for the purposes of which the employee was employed by it (business closure).
  • Ceasing or intending to cease to carry on that business in the place where the employee was so employed (workplace closure).
  • Having a reduced requirement for employees to carry out work of a particular kind or to carry out work of a particular kind at the place where the employee  was employed to work (reduced requirement for employees).

Statutory restrictions - A dismissal is potentially fair if the employee's continued employment would contravene any duty or restriction imposed by or under any enactment. This reason applies where either the employer or the employee would contravene a statutory duty or restriction if the employment was to continue.

Retirement - Where the employer has shown that the reason (or principal reason) for the dismissal was retirement, the question of whether the dismissal was fair must be determined in accordance with section the ERA 1996

SOSR (Some other substantial reason) - The final potentially fair reason for dismissal is that the dismissal is for "some other substantial reason". It is designed to catch potentially fair dismissals that would not fall into any of the other categories.  The employer only has to establish that there was SOSR that could justify the dismissal. It is still for the tribunal to decide if it was reasonable for the employer to dismiss the employee for that reason in the circumstances. The courts and tribunals have held that the following dismissals fall within SOSR:

  • Dismissal of an employee in order to implement a change of terms.
  • Dismissal because of a breakdown in the relationship where the employee is the employer's carer and provides "intimate personal activities".
  • Dismissal because of an employee's difficult personality.
  • Dismissal by an employer to protect itself against unfair competition by employees and to prevent them from setting up in competition or to protect confidential information.
  • Dismissal for an economic, technical or organisational reason entailing changes in the workforce on a business transfer (an ETO reason). Any dismissal will be automatically unfair where the sole or principal reason for the dismissal is a transfer of business or a reason connected with the transfer that is not an ETO reason under Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE 2006)). However, if there is an ETO reason, the dismissal will be potentially fair (for SOSR) and the tribunal will have to decide if it was procedurally fair under the ERA 1996.

Reasonableness of the dismissal

Once the employer has established a potentially fair reason for the dismissal under section the tribunal must then decide if the employer acted reasonably in dismissing the employee for that reason.

There are different ways in which the tribunal should approach the question of the reasonableness of the dismissal. In most cases, the "normal" test for reasonableness under section the ERA 1996 will apply. The tribunal must assess the reasonableness of the employer's conduct, not the level of injustice to the employee.

Reasonableness of conduct dismissals

To establish that a dismissal was on the grounds of conduct, the employer must be able to show that:

  • At the time of dismissal, it believed the employee to be guilty of misconduct.
  • At the time of dismissal, it had reasonable grounds for believing that the employee was guilty of that misconduct.
  • At the time that it formed that belief on those grounds, it had carried out as much investigation as was reasonable in the circumstances.

Reasonableness of capability or qualification dismissals

When deciding if the employer acted reasonably in dismissing an employee for lack of capability or qualifications, the tribunal will need to consider factors such as:

  • Whether the employee knew what was required of them.
  • Whether the employer took steps to minimise the risk of poor performance.
  • Whether there was a proper appraisal of the employee and the problem was identified.
  • Whether it provided training, supervision and encouragement.
  • Whether it warned the employee of the consequences of failing to improve.
  • Whether it gave the employee a chance to improve.
  • In some cases, whether the employer considered alternative employment.
  • In some cases, a single act of poor performance may warrant dismissal. In most cases, an employer will need to address ongoing capability issues with an employee as part of a fair procedure.

Reasonableness of redundancy dismissals

An employer will normally not act reasonably unless it:

  • Warns and consults any affected employees (or their representatives).
  • Adopts a fair basis on which to select for redundancy.
  • Takes such steps as may be reasonable to avoid or minimise redundancy by redeploying potentially redundant employees within its own organisation.
  • Reasonableness of dismissals for breach of a statutory restriction
  • In deciding whether a dismissal for breach of a statutory restriction was fair, the tribunal will need to decide if the employer acted reasonably in dismissing the employee for that reason. This would involve considering:
    • The extent of the statutory restriction and the extent to which it affects the employee's ability to do their job.
    • The duration of the statutory restriction.
    • Any alternatives to dismissal, for example adjustments to the job or alternative employment.

Fair dismissal procedure 

The ERA 1996 requires an employer to establish a potentially fair reason for dismissal and to act reasonably in treating that reason as sufficient to justify dismissal. In applying and interpreting these statutory requirements, the courts and tribunals developed the best practice concept that, in order to act reasonably, an employer had to follow a fair procedure when dismissing an employee.

Automatically unfair dismissals

In certain circumstances, a dismissal is deemed automatically unfair where a dismissal is automatically unfair:
There is no qualifying period of service in most cases. There is no maximum compensatory award in most cases.

Automatically fair dismissals

In addition, a dismissal will be automatically fair if it is a dismissal:

  • While participating in unofficial industrial action.
  • During a lock-out or official industrial action, where the employer dismisses all relevant employees.
  • For the purposes of national security.

In these cases, once the employer has established that the relevant reason applies, the dismissal is automatically fair and there is no need to show that the employer acted reasonably in dismissing the employee for that reason.

Who can claim unfair dismissal?

In order to bring a claim for unfair dismissal, an individual must usually be both an employee and have at least one year's service. Only those who are employees can claim unfair dismissal. It is therefore not possible for the self employed or workers to claim unfair dismissal.

Employees who believe that they have been unfairly dismissed should bring a claim in the employment tribunal for unfair dismissal on a form ET1.

Time limits

The employee must bring the claim for unfair dismissal within three months of the effective date of termination. The tribunal will only extend the time for bringing a claim where it is satisfied that it was "not reasonably practicable for the complaint to be presented before the end of that period of three months".

Burden of proof

Employee's burden. At the tribunal hearing of a claim for unfair dismissal, the employee has the burden of proof. They must show that:

  • They were employed by the employer under a contract of employment.
  • The employer employed them for (at least) the qualifying period (in most cases, one year). The employer dismissed them, either expressly or constructively.
  • Employer's burden. Once the employee has established these three requirements, the burden of proof then passes to the employer, which must establish:
    • The reason for the dismissal. Only the facts known to the employer at the time of the dismissal will be taken into account by the tribunal when deciding the reason for the dismissal.
    • That, on the balance of probabilities, the reason for the dismissal falls within one of the six potentially fair reasons for dismissal.
    • Neutral burden. The tribunal will then consider if the dismissal was fair.

Remedies

If the tribunal finds that the employee was unfairly dismissed, it will then decide what remedy to award. This may occur at a separate remedies hearing the tribunal will consider whether to make any of the following awards (and in the following order):

  • Reinstatement.
  • Re-engagement.
  • Compensation.
  • The tribunal may also make an award of costs.
  • Compensation

In most cases, where an employee has been held to have been unfairly dismissed, the only remedy to be awarded will be compensation.

If you require any further assistance, please contact Cyril Dennemont or Marina Vincent on 020 8422 5678.

Cyril Dennemont
Partner
020 8872 3032
Marina Vincent
Partner
020 8872 3052