Unfair Dismissal - A Short Summary

This is a very short summary of the structure of dismissal law. A fuller analysis is attached as an appendix to the briefing (below) and further detail is available from the library in the P&I team.

Qualifying Conditions & Exclusions

Although there is no lower age limit and the upper age limit of 65 has been challenged, there are other strict qualifying conditions. Applicants must be employed under a contract of employment and have sufficient service.

People who are under contract but do not have a mutual obligation to supply and perform work are not employees. Some forms of dismissal attract protection from day one, but in most cases an applicant needs one year's service. All applications must be submitted within three months. For further information on employee status and continuous service please see the appropriate P&I Briefings.

What is a dismissal?

An express dismissal is any situation where an employer makes it clear that the relationship has been ended. Obviously an employee can bring the job to an end through resignation and if this is in response to an employer's breach of contract it may be constructive dismissal.

But, it is important to remember the third form of dismissal. If a fixed term contract expires and it is not renewed then the employee is deemed to have been dismissed and the employer must provide reasonable justification.

It is also important to remember that termination by mutual agreement is not dismissal. Examples include voluntary redundancy and early retirement.

Stage One - Potentially Fair Reasons For Dismissal

Dismissal law contains a two stage test - did the employer have a fair reason to justify the dismissal, and did s/he act reasonably in deciding to treat the reason as sufficient basis for a decision to dismiss. The potentially fair reasons are: Capability (skill or health), Conduct, Redundancy, Statutory Ban, or some other substantial reason. Some other substantial reason can include things like organisational change, contract change etc.

Automatically Unfair Dismissals

There are a variety of circumstances in which a dismissal will be unfair regardless of the procedure adopted by the employer. In most of these cases the law seeks to protect employees from dismissal for asserting a statutory right. However, employers invariable advance some alternative explanation for the dismissal and tribunals have tended to be reluctant to find that the dismissal is for a reason that is automatically unfair.

Stage Two - A Reasonable Decision?

Where the employer can point to a potentially fair reason for dismissal, the decision of the tribunal will depend on whether in the circumstances (including the size and administrative resources of the employer's undertaking) the employer acted reasonably or unreasonably in treating it as a sufficient reason for dismissing the employee, and this shall be determined in accordance with equity and the substantial merits of the case.

Tribunals take the view that in many cases there is a band of reasonable responses within which one reasonable employer might dismiss while another might not. In order to act unlawfully an employer must move beyond this band and take a decision that no reasonable employer would make.

Crucially, it is therefore not sufficient to argue that there was more the employer could have done to enhance the fairness of the dismissal. The question is posed in the reverse: did the employer do so little that any reasonable employer would have acted differently?

Remedy

Rarely awarded, re-instatement restores the employee to their old job, while re-engagement simply restores some form of work for the applicant. This is not an option where dismissal has broken mutual trust and confidence. Far more common is compensation broadly based on redundancy pay plus loss of earnings.

New Employment Act

Please note: These measures will be implemented in April 2003. New statutory procedures for discipline and dismissal as well as grievance will be incorporated into contracts of employment. Existing arrangements will remain in place provided they comply with these new minimum standards.

An employer's failure to comply with the statutory dismissal process will render any dismissal automatically unfair. But where there is an enhanced contractual procedure that is ignored by the employer this will no longer lead to a finding of unfair dismissal if the employer can show the dismissal would have occurred in any event.

Tribunals will normally be required to increase an award by a degree of 10 to 50 per cent where an employer unreasonably fails to provide or follow the statutory procedures and time limits will be extended to permit full use of statutory procedures.

However, compensation will be reduced where an employee fails to make use of the grievance procedure to resolve a complaint before going to the employment tribunal.

1. Unfair Dismissal - the Key Issues

Does the person qualify?

These are the key questions to ask when faced with any dismissal case. The most awkward questions tend to be whether the reason for dismissal was fair and whether the employer acted reasonably in treating this reason as sufficient to justify the dismissal of the worker.

Were they dismissed?

Was there a fair reason?

Did the employer act reasonably?

What is the remedy?

2. Qualifying Conditions & Exclusions

Employee Status & Continuous Service

Applicants must be employed under a contract of employment and have sufficient service. For further information on employee status and continuous service please see the appropriate P&I Briefings.

Age

Unlike redundancy there is no lower age limit for unfair dismissal. Child workers have unfair dismissal rights. No claim is possible after 'normal retiring age' - which is 65 unless the contract provides for earlier retirement.

Contracting Out

As a general rule, any clause or agreement which purports to exclude an employee from a statutory right is void.

Settlements

COT3 settlements through ACAS or valid compromise agreements extinguish the right to claim unfair dismissal

Fixed term contracts

The old position was that employees could sign clauses under which they waived their right to claim unfair dismissal at the end of a fixed term contract. No new waivers were permitted after October 1999, and waivers pre-dating 1999 cannot be extended.

Time bar

Dismissal claims must be lodged at the tribunal within three months of the effective date of termination.

3. What is a dismissal?

Express Dismissal

This includes words or actions by the employer that are taken as evidence of the employer's intention to terminate the contract. This includes forced resignation and resignation by deception.

Constructive Dismissal

This is a fundamental breach of a material term that goes to the root of the relationship. The breach must be the reason for resignation and the employee must not affirm by waiting too long.

Non-renewal of fixed term

This is often overlooked. Where a fixed term contract expires the employer must either renew it or justify the decision not to renew under dismissal law.

4. Cases Where There Is No dismissal

Some resignations

If it is not a constructive dismissal, forced resignation or deception, then a resignation prevents a claim for unfair dismissal.

Termination by mutual agreement

Early retirement and voluntary redundancy are two examples of cases where both parities agree terms on which the contract ends by mutual consent.

Automatic termination

Some employers try to draft contracts that self-destruct in particular circumstances. For example, "this contact ends when Scottish Executive funding is withdrawn". Unison would argue that such a clause is void as it seeks to contract out of employment law. However, if it is not void, the contract ends without termination.

Termination by performance

If the contract defines a specific task to be performed, the contract ends when that task is complete and there is no dismissal.

Frustration

This is a narrow category in which an unforeseen development prevents the contract being performed in the manner envisaged by the parties. For example, imprisonment of the employee.

5. Stage One - Potentially Fair Reasons For Dismissal

Capability - skill or health

If the basics of the claim are competent, the law sets out a two stage test. Unless it is constructive dismissal the onus is on the employer to prove that the decision to dismiss was fair. First, the employer must identify at least one potentially fair reason for their actions. The reasons are listed opposite. Later the employer must show that they acted reasonably in treating this as a sufficient basis for the dismissal.

Conduct

Redundancy

Statutory Ban

Some other substantial reason

6. Automatically Unfair Dismissals

General

There are a variety of circumstances in which a dismissal will be unfair regardless of the procedure adopted by the employer. These are listed below. However, employers invariable advance some alternative explanation for the dismissal and tribunals have tended to be reluctant to find that the dismissal is for a reason that is automatically unfair. Where tribunals find more than one reason behind a dismissal they will seek to determine which is the main or effective cause of the dismissal.

• Pregnancy or maternity leave
• Taking leave for family reasons
• Performing certain health and safety activities
• Refusal of Sunday working by shop and betting employees
• performing certain working time activities
• performing certain functions as a trustee of an occupational pension scheme
• performing certain functions as an employee representative under TUPE or the Collective Redundancies legislation
• the making of a protected disclosure

• asserting a statutory right

• asserting minimum wage rights
• seeking to benefit from tax credits
• rights in relation to transnational information and consultation
• holding the status of a part-time worker
• participating in 'protected' industrial action
• performing certain functions in relation to trade union recognition
• participation in trade union membership or activities and
• spent convictions of the Rehabilitation of Offenders Act 1974

7. Stage Two - A Reasonable Decision?

The band of reasonable responses

Where the employer can point to a potentially fair reason for dismissal, the decision of the tribunal will depend on whether in the circumstances (including the size and administrative resources of the employer's undertaking) the employer acted reasonably or unreasonably in treating it as a sufficient reason for dismissing the employee, and this shall be determined in accordance with equity and the substantial merits of the case.

In Iceland Frozen Foods v Jones 1982 IRLR 439 the EAT held that in many cases there is a band of reasonable responses within which one reasonable employer might dismiss while another might not. In order to act unlawfully an employer must move beyond this band and take a decision that no reasonable employer would make.

Crucially, it is therefore not sufficient to argue that there was more the employer could have done to enhance the fairness of the dismissal. The question is posed in the reverse: did the employer do so little that any reasonable employer would have acted differently?

Size and administrative resources of the employer

This is particularly relevant when considering how sophisticated a disciplinary procedure ought to be; and when considering the scope for offers of suitable alternative employment.

Equity

This only tends to be relevant where:

• Employees have been led by an employer to believe that certain conduct will not lead to dismissal
• There is more lenient treatment in truly parallel circumstances.
• Or more lenient treatment in similar cases casts doubt on the employers stated reason for dismissal

Procedural fairness

If an employer ignores some aspect of their own procedures this may still be lawful if the employer can show that, in doing so, they acted reasonably. (See note on new Employment Bill)

8. Capability - Lack of Technical Skill

Genuine belief on reasonable grounds

It is not necessary for an employer to have conclusive proof that an employee lacks competence. The test sets a significantly lower standard. However, it will rarely be lawful to dismiss an employee who has not had the chance to improve.

Investigation or appraisal

Although the measure of competence need not be exact, an employer must take reasonable steps to achieve an objective view of the quality of work.

Warnings

Unless an employee is guilty of gross incompetence, warnings should be used to indicate the level of performance required.

Chance to improve

In addition to warnings, the requirement for 'reasonableness' means that some training and support will be expected in most cases.

Disability Discrimination

Where performance is impaired by a disability the employer has a duty to consider reasonable adjustments.

9. Capability - Health

Persistent short term absences

The belief that employees with properly certificated absences cannot be sacked is very inaccurate. Even if the absences are relatively short the employer is entitled to demand a minimum level of attendance at work.

Long term absence

Employees can be dismissed without compensation where the employer has reasonable grounds to belief that the employee will not be able to perform work for medical reasons.

Consent &

Medical investigation

Dismissals relating to health require evidence and the employee will normally be asked to provide information via their own GP or through an independent medical assessment. Where an employee withholds consent an employer is entitled to proceed and judge the situation on the limited information available.

Evidence of incapacity

Objective evidence of significant incapacity is not, of itself, sufficient to justify a decision to dismiss. It is essential that the employer to completes the remaining stages below.

Consultation & other contributory factors

Unless it would be utterly futile, an employer must consult with an employee over the response to the medical evidence. This information may highlight essential factors that will effect the reasonableness of the decision such as work related problems contributing to ill health.

Alternative employment

Consultation is also essential to establish whether alternative employment could be used to avoid dismissal.

Disability Discrimination

Finally, consultation is the key point at which the employer can explore reasonable adjustments that could be made to accommodate an absent worker.

10. Conduct

Burchell Test

This requires employers to show that they have a genuine belief that misconduct took place and that this belief is held on reasonable grounds after a reasonable investigation.

Genuine Belief

If there is no genuine belief in misconduct then the employer fails both stages of the unfair dismissal test.

Reasonable Grounds

It is important to remember that the employer does not have to prove guilt beyond a reasonable doubt. The test is balance of probabilities so a 51% chance that misconduct occurred is sufficient to merit dismissal.

Reasonable investigation

The ACAS code is not mandatory but an employer will have to provide a substantial reason to justify any significant departure from this established benchmark.

Band of reasonable responses

To succeed in a conduct case the employee has to go beyond procedural irregularities and show that no reasonable employer would have decided to dismiss in these circumstances.

Blanket dismissals

Groups of workers can be sacked for the conduct of one member of the group where:

• The conduct in question would justify dismissal
• The employer conducted a reasonable investigation
• The employer acted reasonably in identifying the group of possible culprits
• The employer could not identify the individual culprit or culprits from within the wider group.

11. Redundancy

Definition of redundancy

The definition of redundancy is easily triggered:

• Closure of a business
• Closure of a particular workplace
• Diminishing need for employees to do work of a particular type

Collective consultation

It is important to remember the obligation to consult with unions when the employer proposes to dismiss as redundant 20 or more employees at one establishment within a period of 90 days. This consultation should dictate the manner in which individuals are treated (see below)

If there is no union consultation this may be a factor pointing to an unreasonable decision. The other three key factors described below.

Pool & Selection Criteria

It is no longer automatically unfair to depart from agreed selection procedures. However, there is a danger for employers that a departure from agreed process will be seen as unreasonable.

Individual consultation

As with the case where an employer has evidence of incapacity, selection for redundancy through a fair process is not, of itself, sufficient to merit dismissal. The employer must consult with employees unless such consultation would be utterly meaningless.

Alternative employment

One of the reasons why consultation is critical is the possibility that alternative employment could be used to avoid dismissal.

Automatically Unfair Selection

As with unfair dismissal, there are a variety of protected reasons such as pregnancy for which it is automatically unfair to select someone as redundant.

12. Some Other Substantial Reason

General

The law states that it is potentially fair to dismiss an employee for some other substantial reason of a kind such as to justify the dismissal of an employee holding the position the employee held. Therefore any reason can be advanced provided that it is substantial rather than frivolous or trivial. In addition, the decision to dismiss must be reasonable in all the facts and circumstances.

Business re-organisation

Re-organisations need not be essential, but must be based on evidence of 'sound, good business reasons'.

Third party pressure to dismiss

Main contractors often reserve the right to require the removal of staff employed by sub-contractors. This can be fair although this possibility should be made known during recruitment and alternative employment must be explored.

Difficulty with other employees

Inter-personal problems that give rise to inefficiency rather than misconduct may justify dismissal after warnings.

Expiry of fixed term contract

This should properly be dealt with as a redundancy and alternatives would need to be explored before dismissal for this reason would be viewed as reasonable.

TUPE ETO dismissals

ETO dismissals may appear to overlap with a redundancy analysis. However, it is theoretically possible for economic, technical or organisational reasons to justify a dismissal without redundancy providing the employer's decision is reasonable.

Inappropriate conduct in a private capacity

Obviously this is controversial. Draft text for the new equality directives appears to strengthen the ability of certain organisations to dismiss employees whose lifestyle clashes with the ethos of their employer.

Imprisonment of employee

This might be contractual frustration but, if not, it could be an SOSR dismissal. Similar arguments might apply to remand and restrictive bail conditions.

13. Remedy

Re-instatement &

Re-engagement

Rarely awarded, re-instatement restores the employee to their old job, while re-engagement simply restores some form of work for the applicant. Not an option where dismissal has broken mutual trust and confidence.

Basic award

The same calculation as the statutory redundancy payment and subject to the same statutory limits. May be reduced where the employee refuses full reinstatement, where the employee's conduct makes a reduction just and equitable or where there was a redundancy situation and a payment has already been made.

Compensatory award

Immediate loss is net loss incurred up to the tribunal hearing.

Future losses are those ongoing net losses that may arise after the hearing

Losses may include expenses reasonably incurred by the applicant such as those associated with job hunting.

Tribunals commonly award in the region of £200 for loss of statutory rights

There is a publication that offers guidance on how to calculate pension losses

If the employee has been unfairly stigmatised in a manner that clearly diminishes their employability this may be taken into account in calculating losses.

The applicant has a duty to mitigate their loss.

The compensatory award may be reduced where the employee has contributed to their own dismissal, where a lower award would be just and equitable, or where the employee fails to mitigate their loss.

An award for immediate loss may be reduced if the DSS recoups benefits claimed by the applicant and ongoing benefit claims will be reduced during any period covered by a compensatory award.

14. New Employment Bill

• The Bill proposes the creation of new binding statutory procedures for discipline and dismissal as well as grievance.
• These will be statutorily incorporated into contracts of employment.
• Existing arrangements will remain in place provided they comply with these new minimum standards.
• An employer's failure to comply with the statutory dismissal process will render any dismissal automatically unfair.
• There will be new minimum compensation for employees dismissed in breach of the statutory procedure.
• However, the Bill will undermine the effect of Polkey with regard to procedural fairness. A breach of the statutory procedure will be automatically unfair. But where there is an enhanced contractual procedure that is ignored by the employer this will no longer lead to a finding of unfair dismissal if the employer can show the dismissal would have occurred in any event.
• Tribunals will normally be required to increase an award by a degree of 10 to 50 per cent where an employer unreasonably fails to provide or follow the statutory procedures.
• Tribunals will also be required to reduce awards by 10 to 50 per cent where the employee fails to make appropriate use of the statutory procedures.
• Regulations will define the circumstances in which compensation is to be varied.
• Variation in compensation will also apply to discrimination claims, working time claims and deductions from pay.
• Time limits will be extended to permit full use of statutory procedures.
• The Bill gives a vague outline of a possible power to bar employee claims where a statutory grievance has not been pursued.
• The Bill also contains a range of other measures that will be the subject of further training.