Unfair Dismissal

To say that dismissal from employment is one of the largest areas of contention between employers and employees is somewhat of an understatement.  In 2009/10 50,900 unfair dismissal claims were commenced in the Employment Tribunal (although less than 10% of those were ultimately successful).

Unfair dismissal is a statutory claim arising under the Employment Rights Act 1996 (ERA).  It is nothing to do with the termination arrangements expressed in the contract of employment.  If the employer fails to honour the employee’s contractual right, for example, to notice this may give rise to a wrongful dismissal claim but it does not in itself bring into question the fairness of the dismissal for the purposes of an unfair dismissal claim.  Equally, the employer may have reserved the right in the contract to terminate employment in certain circumstances e.g. following a specified period of sickness absence.  However, acting in accordance with this reserved right will not necessarily save the employer in an unfair dismissal claim if the employer has not acted reasonably and fairly in all other respects.

Under the ERA an employee with one year’s continuous employment with their employer has the right not to be unfairly dismissed.  If the employer wants to terminate employment it has to first establish one of the fair reasons under the ERA and act reasonably and fairly in applying that reason.  The potential fair reasons for termination of employment are:

• Conduct – more commonly expressed as misconduct, either repeated instances or a one-off instance of gross misconduct

• The employee’s capability i.e. their ability to do their job – this can relate to performance or qualification issues or incapability on grounds of long-term sickness.

• Redundancy -often thought of as a type of dismissal in its own right, but redundancy is actually one of the fair grounds for dismissing an employee.

• Retirement – again, often thought of as a termination in its own right, but retirement is one of the fair grounds for dismissal.  Currently, employers can resist an unfair dismissal claim provided that they have followed the statutory retirement procedure.  The law in this area is set to change in 2011.

• Statutory restriction -  i.e. where to continue to employ the employee would amount to a breach of the law.

• Another substantial reason –a ‘catch-all’ provision which can cover certain circumstances that do not fall within the other categories highlighted above, but are genuine and substantial reasons why the employment cannot continue.  This can include, for example, where the employee is imprisoned or where there is a serious relationship issue between employer and employee or between co-employees

Most commonly, unfair dismissal claims arise out of misconduct or issues involving capability i.e. performance or sickness related dismissals and redundancy.

There are some exceptional circumstances in which an employee can bring an unfair dismissal claim without having one year’s service.  The most common of these circumstances include where the employee alleges that they were dismissed in connection with pregnancy or as a result of asserting a statutory right.

In addition to establishing one of the fair reasons for dismissal, the employer has to act reasonably both in relying on that reason and in the way they handle the dismissal.  The issue of fairness is largely governed by codes of practice issued by ACAS which are taken into account by an Employment Tribunal.

For example:
In a conduct related dismissal, unless the employee’s misconduct is so serious as to justify gross misconduct, the employee will normally have had to have received at least one prior written warning for the dismissal to be regarded as fair.

Where dismissal is on grounds of poor performance, the Tribunal will want to be satisfied that the employee has been advised previously of the performance issues and given an opportunity and the necessary support to improve.

Where dismissal is related to sickness absence, a Tribunal will want to hear from the employer as to what efforts they have made to obtain medical information and to explore ways of getting the employee back into work before making the final decision to dismiss.

In all cases there is a heavy burden on employers not only to act fairly but to be able to demonstrate that they have done so to the satisfaction of an Employment Tribunal.

Where an employee succeeds with an unfair dismissal claim in the Employment Tribunal, there are 3 options open to the Tribunal – re-engagement, reinstatement and compensation – but most commonly compensation is awarded.

Compensation for unfair dismissal is broken down into 2 elements.  The first is the basic award which is calculated in exactly the same way as statutory redundancy pay, (see redundancy section) the second is the compensatory award which, apart from a small payment for loss of employment rights, is a payment designed to reflect the employee’s net loss of earnings arising from the dismissal.  In ordinary unfair dismissal claims there is a ceiling on the compensatory award currently (in 2010) £65,300.  However, in the exceptional cases where a year’s service is not required, the unfair dismissal, if proven, is an automatic unfair dismissal and in these cases there is no ceiling on the compensatory award.

A word about constructive dismissal …………

Although constructive dismissal claims arise where the employee resigns in circumstances where they claim to have been forced to do so by the employer, this claim also forms part of unfair dismissal.  If the employee succeeds in proving that they were forced into resigning because of a fundamental breach of contract by the employer, it will almost certainly follow that dismissal will be found to be unfair and compensation awarded.

Unfair dismissal facts and figures:

Of the 50,900 unfair dismissal claims brought in 2009/10 only 5,200 were successful at an Employment Tribunal.

12,200 of the 50,900 unfair dismissal claims were withdrawn by the employee, 22,400 were settled by ACAS.

3,900 claims were struck out by the Tribunal prior to reaching a full hearing.

The median award in respect of the successful claims was £4,903.

The average award was £9,120.