Every eligible employee has a statutory right not to be unfairly dismissed pursuant to section 94 of the Employment Rights Act 1996. It is important the employer has a good reason for the dismissal and follows a fair procedure otherwise an employee could have a claim for compensation for unfair dismissal. This could have serious consequences for the employer. Both in terms of financial penalties and the management time taken up dealing with the claim. Dismissals should always be handled with care. Therefore we have put together here a short guide to unfair dismissal.
Who can make a Claim for Unfair Dismissal?
The right to bring a claim in the Employment Tribunal for unfair dismissal is subject to a number of qualifying conditions:
- Employees only
Only employees can claim Unfair Dismissal. Self-employed, workers and independent contractors are excluded. Armed forces, police officers and mariners are also excluded from bringing a claim for unfair dismissal.
- 2 years continuous employment
In most cases, employees must have been continuously employed for 2 years in order to make a claim for unfair dismissal.
An employee’s statutory notice period can be taken into account when calculating continuous employment.
There are certain circumstances when a dismissal will be automatically unfair and no qualifying period is required. For example where the dismissal is on the grounds of pregnancy, discrimination or whistle blowing.
- There must be a dismissal
An employee must show they have been dismissed.
A dismissal can occur in one of the following ways:-
- Actual dismissal by Employer. I.e. The employer tells the employee they are dismissed.
- Constructive dismissal. Generally this arises in circumstances where the employee is entitled to terminate the contract by reason of the employer’s bad conduct. There must be a serious breach by the employer that entitles the employee to treat the employment contract at an end. A single incidence of unreasonable behaviour by an employer may not be enough.
- Termination of a limited term contract on the happening of the limiting event. A limited-term contract is one that is not intended to be permanent. Which includes provision that it will terminate by virtue of a ‘limiting event’. For example, the expiry and non-renewal of a fixed term contract is a dismissal for the purposes of Unfair Dismissal.
Resignation is not a dismissal unless an employee can prove Constructive Dismissal.
Is there a potentially fair reason for dismissal?
Once an Employee has established he/she is eligible to bring a claim for Unfair Dismissal, the next issue to look at it is whether the employer had a fair reason for the dismissal. This is a two stage process:
- First Test – reason for dismissal
There are only five potentially fair reasons for dismissal. The employer has the burden of proving one of them applies:-
- Capability or qualifications e.g. sickness or incompetence.
- Illegality e.g. lorry driver banned from driving.
- Some other substantial reason e.g. business reasons.
An employer will have to show that the dismissal falls within one of the above potentially fair reasons. Even if there is a fair reason for dismissal, the decision to dismiss for that reason must still be fair. Given all the circumstances of the case.
- Second Test – range of reasonable responses
If one of the above grounds is established, the Tribunal will look at whether an employer acted reasonably. They will ask if a dismissal is within a range of reasonable responses. The Tribunal will take into account the matters known to the employer and the resources of the employer. Also whether other employees were treated in a similar way and whether the matter was capable of being dealt with short of dismissal.
Has a fair procedure been followed?
In addition to showing a fair reason for dismissal, the dismissal could still be unfair if the employer has not followed a fair procedure. A fair procedure usually includes carrying out a proper investigation, consulting with the employee and in some cases giving the employee warnings. A useful test will be whether the employer’s actions accord with the ACAS Code of Practice.
An employee who has been unfairly dismissed can claim:
- Reinstatement i.e. to return to their old job.
- Re-Engagement i.e. to secure a different job with same employer.
- Compensation Compensation usually includes:
The basic award is in essence, to reflect the fact that the employee has been unfairly dismissed. It is calculated by reference to a formula based on age, length of service (maximum of 20 years) and last week’s pay (a week’s pay is subject to a statutory maximum which from 6 April 2019 is £525 per week).
This part of the award compensates the employee for financial losses suffered because of the unfair dismissal and is in addition to the basic award. An employee can claim for loss of-
- Immediate loss of net salary and future loss of net salary until such time as the employee finds another job, including overtime and bonuses.
- Pension rights.
- Fringe benefits e.g. company car.
- Statutory rights e.g. loss of accrued redundancy rights.
The level of compensation can be affected by a failure to follow the ACAS Code of Practice. If an employer fails to follow the ACAS Code of Practice, then any compensatory award may be increased by up to 25%. Where the failure to follow the Code of Practice is that of the employee, then any compensation may be reduced by 25%. The power to increase/decrease compensation is a discretionary one and may only be used if it is just and equitable.
The compensatory award is generally subject to a statutory maximum which from 6 April 2019 is the lower of:
- 1 year’s pay
The statutory cap does not apply where the dismissal was for a number of automatically unfair reasons, namely, health and safety reasons, whistle blowing or selection for redundancy on either basis.
An employee has a duty to mitigate their loss by for example obtaining suitable alternative employment. It is a breach of duty to mitigate if an employee refuses a reasonable offer of employment. An employee will not be entitled to compensation for loss mitigated.
If an employee makes a claim it will be in the Employment Tribunal and they must make their claim within three months of the effective date of termination which is usually the date of dismissal/last day the employee worked for the employer. In certain limited circumstances, this time limit can be extended if the parties are involved in the early conciliation process with ACAS. The time limit for lodging a claim is strict and if you miss the date, the right to bring a claim could be lost. Advice should be taken on the date a claim should be lodged by.
Prospective claimants in the Employment Tribunal will be required to contact ACAS prior to issuing “relevant proceedings”. ACAS will then refer the matter to a conciliator in a process known as “Early Conciliation”. Almost every employment claim is considered to be “relevant proceedings” for the purposes of this requirement.
Notification to ACAS
It is mandatory for prospective claimants to notify ACAS prior to bringing a claim and only basic details are required on a simple form. ACAS will then contact the prospective claimant to invite them to partake in conciliation. The decision as to whether to take part in the conciliation process is voluntary, although obviously may reflect negatively on the prospective claimant at the Tribunal if they choose not to do so. Prospective respondents can also decline to take part in the conciliation process.
It is also open to prospective respondents to initiate the conciliation process before an employee does so, for example if an employer anticipates a dispute arising, it can notify ACAS itself rather than waiting for the employee to do so.
If the conciliator determines that a settlement is not possible or cannot be reached within one month (extendable by up to 2 weeks where both parties consent and settlement seems likely within that period), the conciliator will issue the prospective claimant with a certificate to that effect, allowing them to then make their application to the Employment Tribunal.
How we can help
Our experienced employment solicitors advise both employers and employees. If you are an employer we can advise you on the options open to you when dismissing an employee and how to minimise the risk of a claim being made against you, or if you are employee we can advise you on your employment law rights and whether you have a claim against your employer and the likely value of that claim. We provide specialised and pragmatic advice on all aspects of employment law.
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Please note, this article does not constitute legal advice and its content may be subject to modification depending on any changes in the law.